Q: In your book, Trade Your Way To Financial Freedom, you state that one of the reasons that many traders go bust is that they don’t practice correct position sizing strategies and that most of the beginners are under capitalized. If you are trading equities or stocks, is there a minimum value a trading account should have before you should trade? Once you have enough equity to begin trading, if you use a percent risk model for your position sizing method, what is a good starting percent risk per trade?
A: Account size depends upon what you are trading and how you are trading. There are effective ways you can trade stocks with a smaller account size than you could trade futures. As for a percent risk percentage size, I usually give 1% risk as a guideline for safety; however, 0.25% is safer if you are a beginner and don’t know what you are doing yet.
You can answer your own questions but the answers depend entirely upon your objectives. Your objectives are unique to you. How well have you thought through your objectives? Once you have done that thoroughly, you will find the answers to your “how” questions easily.
