In my opinion the most important thing is the risk-reward ratio of every trade. As a trader or investor you have to analyze markets to find opportunities. If you think you found such an opportunity then you have to set an initial stop level and a level where you think your stock/option/future is moving to; in other words where you want to exit your position with a profit. If you did that you have your potential risk and your potential profit/reward.
With these two numbers you can easily calculate the risk to reward ratio, so how many $/€ you are risking for one potential profit. The ratio should be at least 1:2, so for every $/€ you are risking, you can earn at least two $/€. By respecting that rule you need not to be right on every trade. Even better you do not have to be profitable on half of your trades.
Another very important rule is that you should not risk more than a percent of your total account in a trade. In numbers that means if you have an account with $ 100,000 your potential loss (initial stop) of a trade must not be more than $ 1,000. That is called money management and the most important rule of trading. You have to respect that rule or otherwise you will go bankrupt over time. In fact every trader will have ten or more negative trades in a row and as a result if you are risking too much on every trade your maximum drawdown will be too high.
In conclusion you must have a flexible position size. If you are always buying a stock with 10% of your account you will not get an initial risk of 1% or less. In that case you need to trim your position till it fits the 1% rule.
On this topic there is one great book "Trade your Way to Financial Freedom" by Van K. Tharp.
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