Trader tidbits from O

There is really only one thing that can save you from yourself and that is your commitment to following your trading plan. If you force yourself to limit the amount of capital at risk to 2% on any trade, you have gone a long ways towards protecting yourself. However, there is more that you can do. If you are a day trader, you need to think in terms of a maximum intraday draw down. I believe that 4% is a pretty good rule of thumb.

If you are trading the longer term setups, you need some additional structure regarding the maximum number of positions you will hold at any one time. The longer you have been trading, the more you can likely manage. Four to ten positions is a good rule of thumb.

Additionally, you need to give some thought to position sizing. If you are trading longer term setups, don’t allow yourself to take a huge position in one stock or market. Spread it around a bit. A rule of thumb is to limit any one position to between 10% - 25% of your trading account.