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Super Trader, Expanded Edition: Make Consistent Profits in Good and Bad Markets, 2nd Edition by Van Tharp

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PART 4:UNDERSTANDING THE IMPORTANCE OF POSITION SIZING STRATEGIES

System Quality Numbers and Position Sizing Strategies

In brief, your trading system employs a set of rules that tells you when and how to trade. The purpose of a trading system is to make sure that you can achieve your objectives easily through an effective position sizing strategy.

Your position sizing strategy helps you determine how much equity to risk on every trade. Its purpose is to help you meet your objectives. You could have the world’s best system (for example, one that makes money 95% of the time and in which the average winner is twice the size of the average loser), and you still could go bankrupt if you risked 100% on one of the losing trades.

A position sizing ...

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