Position sizing
The size of a position is a risk decision before it is a market decision.
Approach
Analysis before action.
A working method for examining markets with discipline. It is not a system that guarantees successful trades, and it does not make markets predictable.
Methodology
Analysis before action.
Decisions are preceded by a structured examination of the market environment. The sequence below describes a working method. It is not a system that guarantees successful trades, and it does not make markets predictable.
01
Understand
Establish context: the market, the timeframe, the prevailing conditions, and the question being asked.
02
Analyse
Examine structure, price, volume, volatility and the wider fundamental and sentiment picture as analytical inputs.
03
Assess risk
Consider exposure, downside, position size and the conditions under which the idea would be wrong.
04
Act with discipline
If action is taken, it is taken within predefined bounds — not in reaction to noise.
05
Review & adapt
After the fact, review what the market actually did. Adapt the process. Markets change; so must the study of them.
Analytical inputs — not guarantees
The following factors may be considered when examining a market. They are inputs to analysis. None of them, individually or together, guarantees a successful trade or protects against loss.
- Market structure
- Price action
- Trading volume
- Volatility
- Technical indicators
- Fundamental developments
- Economic announcements
- Market sentiment
- Liquidity
- Potential catalysts
Risk
Opportunity begins with understanding risk.
Responsible market participation requires understanding both potential opportunity and potential downside. Markets are uncertain. Volatility is a feature of them. Conditions change, and individual circumstances differ.
Exposure
Concentration, correlation and overall exposure are examined as part of any considered view.
Volatility
Volatility can expand without notice. Analysis that ignores it is incomplete.
Entry planning
If a market is engaged, the terms of engagement should be defined in advance.
Exit planning
Knowing how a view would be concluded is part of taking it seriously.
Discipline
Process exists to constrain improvisation when conditions become emotionally loud.
Scenario analysis
More than one path is possible. Preparing for alternative outcomes is a form of respect for uncertainty.
Changing market conditions
A reading that was sound yesterday may be incomplete today. Review is continuous.
Financial markets involve risk and past performance is not indicative of future results.
Professional philosophy
Five principles that govern the work.
01
Learn continuously
The financial markets never stop changing, and neither should the professional studying them.
02
Analyse before acting
Every potential opportunity deserves careful examination before a decision is made.
03
Respect risk
Understanding potential downside is an essential part of responsible market participation.
04
Communicate clearly
Financial knowledge has little value if it cannot be communicated effectively.
05
Build relationships
Long-term professional success is built through trust, consistency and respect.
Consultation
Start a private conversation.
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