How to reasonably allocate your position size

I haven’t updated my live trading accounts recently, and many friends have been asking. When I have time, I’ll come by to take a look, but for now I won’t be updating the live trading account. I’ll occasionally answer questions for everyone, or post some thoughts and ideas. I believe everyone has found the market conditions during this period really tough. This market is actually still manageable—it depends on the selected instruments and your approach. After the New Year up to now, the market has essentially determined that this will be a prolonged battle this year, and the whole cycle needs to run longer. That’s how you can face the current market with more composure; otherwise, this kind of market can be quite uncomfortable.

One of the main reasons many friends feel bad in this market is that they don’t know how to arrange their position size, which leads to drawdowns that can’t be controlled. A few friends also asked about this, so I’ll share some of my own suggestions with everyone, and I hope they’ll be helpful.

Friends who have followed me for a long time should know how I arrange my position size. In market conditions that I consider viable, I almost always keep a heavy position, and my 200-day track record is almost entirely heavy-position trades. I don’t really recommend this kind of arrangement. Maintaining a heavy position requires very strong control over your trading rhythm. It isn’t just demanding in terms of the instruments you choose—you also have to be decisive when it comes time to cut. Because the difficulty is relatively high, I don’t recommend it.

So how should you arrange your positions in a way that’s relatively more reasonable? I’ll explain this based on my own experience and understanding. I divide the position size into four parts: 1 part when the market is poor, 1–2 parts when the market is average, and 2–3 parts when the market is good. Try not to go all-in. This is the arrangement I think is relatively reasonable. It lets you push when you need to and retreat when necessary, and it enables you to grip the overall rhythm more tightly.

Of course, in daily trading, you don’t need to be overly rigid, and there’s no need to allocate the same position size to every stock. We can allocate a bit more to instruments we’re more confident in. For example, when the market is average and you use 2 parts of position size (half a position), then the instruments you like more can take up 6 or 7 tenths of that, while relatively mediocre ones take up only 3 or 4. In this way, you can maintain rhythm control while also retaining an offensive capability.

So dividing position size into four parts—I personally think it’s relatively more reasonable, and it also suits the broader public. It’s a sustainable approach as well. Of course, this is only my personal understanding and doesn’t represent a standard answer.

Alright, that’s about it for now. I hope this helps everyone. Let’s chat again next time—thanks!