WalidR

asked him what separates traders who survive from traders who blow up

his answer surprised me

it wasn't strategy. it wasn't discipline. it wasn't psychology.

"bet sizing. that's it. that's the whole game."

here's what he explained:

THE THESIS:

"I've seen hundreds of traders come through. good ones. smart ones. talented ones."

"90% of the ones who blew up didn't blow up from bad trades. they blew up from bad sizing on normal trades."

"a 1R loss at proper size is nothing. a 1R loss at 10x proper size is account death."

THE EXAMPLES:

he walked me through case studies:

TRADER A:
- excellent strategy, 58% WR
- consistently profitable for 2 years
- had a "high conviction" trade
- sized up 5x normal position
- trade lost
- drawdown was 23% instead of 5%
- psychology cracked
- revenge traded the next week
- blew the account in 8 days

"he didn't blow up from a bad trade. he blew up from a big trade."

TRADER B:
- mediocre strategy, 51% WR
- survived for 11 years
- never sized above 0.8% per trade
- took the same size on every trade
- no "high conviction" sizing
- compounded slowly but never blew up

"he's worth $4M now. started with $50k. just never killed himself with size."

THE RULE:

"every trader who blows up violates the same rule"

"they size based on CONVICTION instead of MATH"

"'this one feels right' so they go bigger"
"'I'm on a winning streak' so they go bigger"
"'I need to make it back' so they go bigger"

"conviction is how you justify stupid sizing"

THE DATA:

he showed me internal research:

traders who sized based on conviction:
- average survival time: 2.4 years
- account explosion rate: 74%

traders who sized mathematically (same size every trade):
- average survival time: 8.3 years
- account explosion rate: 12%

"it's not even close. variable sizing kills traders."

THE MATH:

he broke down why "high conviction" sizing is stupid:

"let's say you're 60% accurate on normal trades"
"let's say you're 70% accurate on 'high conviction' trades"

"sounds good right? go bigger on the 70% trades?"

"wrong. here's why:"

"at 60% accuracy with 1% risk, a 4-loss streak costs you 4%"
"at 70% accuracy with 5% risk, a 4-loss streak costs you 20%"

"and 4-loss streaks happen even at 70% accuracy"

"you FEEL more confident but the math doesn't justify the size increase"

THE SOLUTION:

"how do you size then?"

"same size every trade. no exceptions."

"what about when you're really confident?"

"same size. confidence isn't accuracy."

"what about when the setup is perfect?"

"same size. perfect setups lose 40% of the time."

"what about when you're on a winning streak?"

"same size. streaks end."

"every trade gets the same respect. the 'boring' ones and the 'perfect' ones."

THE IMPLEMENTATION:

his rules for position sizing:

1. calculate your base risk (0.5-2% depending on account size and edge)
2. that's your risk on EVERY trade
3. never size up. ever.
4. if you want more money, scale accounts/capital. don't scale risk.

"I've been trading 23 years. I've never taken a trade above 2% risk. not once."

"my biggest winners and my 'meh' trades got the same size"

"I'm not trying to hit home runs. I'm trying to not strike out."

THE TRUTH:

retail traders think they need big trades to make big money

professionals know big trades make big losses

the traders managing real money all size conservatively

they make money through VOLUME of good trades not SIZE of individual trades

if you're varying your position size based on "conviction":
you're already on the path to blowing up

it's just a matter of when

same size
every trade
no exceptions

that's how you survive