The greatest challenge for many traders is learning how to manage themselves. The markets rise and fall, and prices move unexpectedly as news events deliver uncertainty. The costliest trading mistakes happen when, in this environment, emotions take control at the wrong moment.
Fear, greed, frustration and overconfidence have long been recognized as powerful influences on trading behaviour. While many traders focus on strategies and market analysis, more are paying closer attention to a less glamorous but equally important concept: position sizing.
Position sizing simply refers to how much capital is allocated to a single trade. It may sound like a technical detail, but it can have a surprisingly large impact on decision-making and emotional stability.
The link between risk and emotion
One of the reasons traders become emotional is that too much money is often riding on a single outcome.
When a position is larger than a trader can comfortably
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