Position Sizing/Measuring Performance
About a year ago I wrote an article about measuring performance where I explained the concept of measuring trading performance in Rs instead of $s. Everyone who trades for a while quickly realizes that $s don't really say too much about performance. You made $10? Maybe great. You made $50.000? Maybe not so good. The question always is in relation to what? What account size does the trader have, and more importantly, what was the risk of the trade compared to the profit (or loss).
Still I keep on seeing everyone talk about and get excited when they see the $$$$$$$. And I get it, at the end that's what counts right? But does it really help you to see someone made $50k on a trade? Maybe the trader runs a hedge fund and he made $50k with $500 million account? And maybe he risked $500k to make that $50k.
I think these are important things you have to think about if you want to succeed and improve your trading. It's also going to help you a lot to understand these concepts to get your position sizing right. So I decided to do a small series on Position Sizing, you can find the first part here: