Today's Quote: “You only win if you aren't afraid to lose." - Rocky Aoki.

Today’s educational piece deals with another important aspect to consider when entering plays. Share sizing is one of the most important concepts of trading and one of the most overlooked. As a matter of fact, you can have a winning game plan, pick winning plays, have a high batting average and average winner to average loser ratio, and still go broke if you don’t share size properly. Many traders suffer the consequences of poor share sizing without even realizing that they have the problem.

How can you go broke with a winning trading plan if share sizing is ignored? Follow along, and see if you have ever experienced something similar. Lets say a play comes along that seems really good, so you decide to play your usual ‘1000’ shares even though the stock as a core play may have a stop of $3.00. The play stops and the loss is more that you usually have. You feel eager to make that money back, so the next play that comes along you play more shares than normal and that play also stops. You lose even more than the first play. You realize that you are down more than you ever thought you would be so you decide to take it easy the next few plays until you get ‘hot’ again. So you play less share size. You probably read somewhere to take it easy when on a ‘losing streak’. Of course, the next three plays are winners but they don’t make up for half of the losses. Now that you have winners, you kick up the share size again, only to lose again. Sound familiar? There may be times when you need to cut back on share size at predetermined levels, but the concept of being ‘hot’ and laying low when ‘cold’ are signs of a novice trader. Professionals play odds and manage money properly. We will discuss more over the next few sessions.