Adrian Reid says use only money you can afford to lose when trading stocks systematically. He warns that watching your account swing wildly can break your discipline, and shares how he once risked nearly his entire net worth to show why conservative position-sizing matters across your career.
When you're starting, when you first start trading, we say trade with money that you can't. That don't trade with money you can't afford to lose. It's important, particularly at the beginning, because.
The emotions that get tied up in the fluctuations in your account much more than you would think, even for a relatively modest account, you see that the dollars going up and down and it can get you very distracted.
So at the beginning of your journey, it's really important to minimize that distraction, minimize the impact of the emotions on your trading decisions, and just allow you to follow the rules without getting sidelined by those or just distracted, thrown off course by those emotional reactions to your trading account swinging around. So if you've got an account which is too big for you, then it's almost impossible to follow the rules consistently and not screw it up.
So at every stage of your journey, this is important, right? So on day one, if you're trading with a $10,000 account and that's all the money you've got in the world, it's going to be really stressful.
And then 10 years down the track, if you're trading with a million bucks and that's all the money you've got in the world and you've got nothing else and no safety net, you want to make sure you're trading it in a way that is not going to cause those emotions to get out of control.
I have at times traded all of my net worth out, apart from my primary residence, and I'm not now because I have other things going on. But.
It is quite stressful. And so you want to create your risk management rules and your, your plan, manage your leverage and your exposure and all of that so that you're not getting sidelined by your emotions. So on day one, that looks different to 10, 15 years down the track. But the most important thing, I think, is to observe how you're reacting to the financial swings in your account and make sure that you can cope with them at every step of the journey. Because it doesn't matter if you've got a $10,000 account or a million dollar account, you can blow it up if you're not careful or if you start doing stupid things.
So I think that's it. It's not always like, I guess now I could afford to lose all of my trading account, it would really piss me off and it would be unfortunate and I'd have to recover from it, but it wouldn't devastate me financially because there's enough other things in my financial world, that means I would be able to survive.
But a few years back, when I literally was trading everything that I have apart from my house.
If I'd lost all of that, that probably would have been devastating. But my approach to trading is so conservative that the chance of me losing it is zero, basically. I mean, it would take a complete worldwide holocaust of nuclear proportions. And then at that point, well, who gives a. If you don't have any money, it doesn't matter. Right. Because we're all screwed.
So that's, you know, you want to think about it at each stage of your journey and make sure that you're comfortable with the fluctuation so that you can follow the rules. And if you can and the emotions aren't getting out of control, then it's fine.
