Position Sizing & the 1% Rule

Chapter One — sample

Two traders can have the same idea on the same morning and opposite years. One buys a quantity chosen by excitement; the other buys a quantity chosen by arithmetic. When the idea fails — and every idea fails sometimes — the first trader loses a month of income and a measure of courage. The second loses a planned, budgeted amount and returns tomorrow with both intact. The difference was never the idea. It was the size.

Position sizing answers one question before any trade is placed: if I am wrong, exactly how much money leaves my account? Professional traders phrase it as a fraction of capital. The best-known version is the 1% rule: never let a single trade's planned loss exceed one percent of your trading capital. On a capital of ₹2,00,000, that means the worst planned outcome of any one trade is ₹2,000 — painful, but survivable a hundred times over.

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