How to maximize your stock trading profits and minimizing losses

Hey, Adrian here, founder of Enlightened Stock Trading. And thanks so much for joining me in this video. Hopefully I'm going to get the sound right because in my last live there was no sound. Totally embarrassing. But anyway, tech problems. In this video, I'm going to share with you one of the most important position sizing lessons for your trading success. And it's all about how to maximize your stock trading profits or your crypto trading profits and minimize your losses. And look, we all know, I mean, hopefully you know, that position sizing is one of the most important areas to focus on if you're going to improve your trading results and survive and win this game long term. But one of the areas within position sizing where traders get particularly sloppy is about adjusting your position size as your account rises and falls. And this is really, really critical. But before I get into that, first thing I want you to do is hit like and subscribe on this channel to make sure that you don't miss any future notifications because I think I've got my streaming right now, so I'm going to be doing a lot more of this and I want to share it with you. And secondly, when you're thinking about your position sizing, the number one thing you've got to do is standardize your position size across all trades. So for a certain system, every single trade should either risk the same percentage of your account or have a certain percentage of your account exposed to each trade. So it might be 0.5% of equity risked per trade. So if your stop loss gets hit, then you only lose 0.5% of your equity or that's percent risk position sizing model. The other position sizing model which is common is percent of equity position sizing model. And that one might be, say you put 5% of your equity into each trade. So if you've got $100,000 and you put 5% of your equity into each trade, then each trade is $5,000 worth. You need one of those two models to make this work and to keep your trading sustainable. Now, the trick to making that work is in this next tip. The number one rule of position sizing is it's got to keep you in the game, keep you alive. So the first thing you do is keep your wrist low. The second thing you've got to do is adjust your risk relative to your trading account. And if you don't do that, then position sizing will work against you. Let me show you why. Okay, let me come over here to my drawing for a second and here's what happens if you choose your position size and you don't change the size as your account size changes. So let's say you start and you've got 100,000 in your account and you have a bit of a loss, and so your account size is now lower. And if you take the next trade still assuming $100,000, what happens is that next trade is slightly bigger as a percentage of your account than it was initially. So the next loss gets bigger. And if you still don't adjust your account size in your position sizing calculation, then the next loss gets bigger and bigger and bigger. And what you find is that your account accelerates against you, the drawdown accelerates against you. So you've got to make sure that you adjust your account size down if you go into a drawdown so that your loss doesn't keep accelerating, accelerating. Now, the flip side of this is.

If you're trading and you're making money, the market is working in your favor, but you don't adjust your account size in your position sizing calculation, then you don't get the full benefit of compounding. Here's what happens. So let's say you made a little bit of money.

And you still position size for this next trade at $100,000, even though you've got $102,000 in your account, the next gain is a little smaller, and the next gain after that is a little smaller and a little smaller and a little smaller. And so you can see that the profits in your account slow down over time. They slow down as a percentage of your account, because what's happening is your trades are getting smaller relative to your increasing account size. So they're making less and less of a difference. And it's the exact opposite. If you don't adjust your account size and you're in a drawdown, the trades are getting bigger relative to your account size. So the losses are getting bigger and bigger and bigger. So it's really critical to to make sure that you link your position size to your account size and adjust it every single day, because that way the math won't work against you. Now, here's what happens if you do this properly. If you go into a drawdown starting at your $100,000, let's say still, and you link your position size for every trade to your account balance. At the beginning you have a bit of a loss, but then your next trade you size a little smaller because you've lost a little bit of money, and so the next trade is smaller and Smaller and smaller. And what happens is the loss, the drawdown slows down. It never goes to zero, but it slows down. There's a bit of a dodgy drawing, but let me try it again here. Basically, it'll slow down instead of speeding up. And if you are in tune with the market and you're making money, then your position sizing will grow and accelerate your account. So you started with your $100,000 and you made a little bit of money. So the next trade you size with a little bit more capital, let's say 102,000 and then next trade and the next trade, because it's going in your favor and you're making money, your trades getting bigger and bigger and bigger. So by linking your position size to your account size, you make the miracle of trading compounding. This is the miracle of trading math work in your favor. And if you don't link your position s to your account size, then that miracle works against you. And so basically you're going to either compound to success or compound to failure. So once you've got your position sizing rule in place, either like half a percent of equity or 1% of equity risked per trade or 5% of equity invested in each trade, that's the number one thing. The number two thing is adjust that every single day to make sure that your position size changes relative to your account size. That will keep the compounding working in your favor. And if you go into drawdown, it it'll stop you from suffering, it'll stop you from accelerating into the drawdown and blowing up your account. So that is the most important things you can do to improve your trading results. Have a position sizing rule, make them consistent across all trades, and then adjust your size relative to your account balance every single day. Don't get lazy and skip it and just size consistently because it's going to work against you on both losses and profits. If you want to make more money trading, then do this one tip and you'll see dramatically improved results over time. So if you want to improve your trading, if you want to systemize and make your trading objective, then the next step is to join the trader success system. Because most traders struggle and fumble around trying to find the answer, trying to find the indicators that work, trying to figure out how much to risk, trying to find the position sizing that works all of these things. And the best step forward is to systemize every aspect of your trading. Have rules that are objective, that you've back tested so you know for 100% certainty that those rules work and the Trade Success System will give you those rules. But not just that. It will give you the skills to test and evaluate those rules and make sure that they're profitable. Make sure you believe and understand that they're profitable so you can follow them consistently. So if you like the idea of being in control of your trading, of having rules that you know work, you placing the trades with confidence and you being a master of your financial destiny, your financial future, you having the skills to build your wealth over decades, then join the Trader Success System. There's a link below in the description for this video and you'll learn exactly the tools, systems and skills you need to, with the ongoing support of the membership to become a master of systematic stock trading. So click the link in the description below if you like this video and got value hit like and make sure you subscribe to this channel to ensure that you don't miss any notifications because I'll be doing a lot more live videos. I want to make sure I help you with your trading. That's all for this video. See you in the next one. Bye for now.