Position Sizing Wins Wars—Ignore It, Trade Like a Jackass
July 22, 2025
Introduction: The Battlefield: Where Legends and Fools Bleed Alike
The market is not a classroom. It’s a battlefield—mud, blood, and the stench of fear. Every trader, from the greenest Robinhood gambler to the grizzled macro titan, steps onto this field with dreams of conquest. But most are carried off on stretchers, not because their ideas were bad, but because their position sizing was suicidal.
Jesse Livermore, the original market wolf, knew this truth in his bones. He rode the ticker tape from rags to riches and back again, his fortune rising and falling with the tides of his conviction and, more fatally, his sizing. “There is only one side of the market and it is not the bull side or the bear side, but the right side,” Livermore said. But even he, the man who shorted the 1929 crash, blew up—twice. Not for lack of insight, but for letting his bets grow monstrous, unmoored from risk. The lesson? The market doesn’t care how right you are. It cares how much you bet when you’re wrong.
Nonlinear Carnage: LTCM, Archegos, and the Anatomy of Ruin
Let’s jump. Greenwich, Connecticut, 1998. Long-Term Capital Management—two Nobel laureates, a war chest of models, and the arrogance of gods. Their trades were “sure things,” their risk “hedged.” But their position sizing was a powder keg. When Russia defaulted, the correlations snapped, and LTCM’s leveraged bets detonated. Four billion dollars vaporised in weeks. The lesson: even the smartest minds are jackasses if they act like immortals.
Fast-forward to 2021. Archegos Capital, run by Bill Hwang, quietly amassed massive, levered positions in a handful of stocks. The trades worked—until they didn’t. A margin call, a forced unwind, and $20 billion gone in a weekend. The market didn’t punish Hwang for being wrong; it punished him for betting like he couldn’t be.
Livermore, LTCM, Archegos—different eras, same gravestone inscription: “Here lies a trader who forgot that survival is the only edge.”
The Psychology of Self-Sabotage: Greed, Fear, and the Siren Song of Size
Why do traders—smart, seasoned, even haunted by past mistakes—keep blowing themselves up? The answer is psychological, not mathematical. Greed whispers, “Double down, you’re on a roll.” Fear hisses, “Cut it all, you’ll lose everything.” But the real killer is ego—the belief that this time, you’re smarter, faster, luckier.
Ray Dalio, architect of Bridgewater and chronicler of cycles, calls this the “Big Cycle”—the endless loop of boom, bust, and human folly. “How Countries Go Broke” isn’t just about nations; it’s about traders, too. The cycle is always the same: confidence swells, positions grow, risk is ignored, and then—snap—the margin call. Dalio’s edge isn’t clairvoyance; it’s humility, systematised. He sizes up positions so that no single loss can bring him down. That’s not cowardice. That’s how you stay in the game.
Livermore’s ghost would nod grimly. He wrote, “The nature of the game as it is played is such that the public should realise that the truth cannot be told by the few who know”. The truth is this: the market is a machine designed to exploit your worst impulses. Position sizing is the only lever you control.
The Only Real Edge: Sizing as Survival, Sizing as Strategy
Forget the myth of the perfect trade. There is no holy grail, no secret indicator, no algorithm that guarantees victory. The only edge that endures is position sizing. Why? Because it’s the only thing that keeps you alive long enough for your edge—if you have one—to matter.
Dalio’s “Principles” are gospel in the hedge fund world: diversify, size small, survive the storm. Livermore, for all his bravado, admitted that his greatest losses came not from bad ideas, but from betting too big. The market is a casino where the house edge is psychological. The only way to win is to play a long game, sizing every bet so that ruin is impossible.
Position sizing is not just risk management—it’s self-management. It’s the discipline to walk away from the table with chips in your pocket, not just stories of what could have been. It’s the humility to know that you can be wrong, and the wisdom to ensure that being not good doesn’t end you.
It’s absolutely brutal but in the best possible manner.
The Final Reckoning: Trade Like a Jackass, Die Like One
The market is littered with the bones of geniuses who ignored position sizing. Their stories are cautionary tales, whispered in trading pits and hedge fund war rooms. The lesson is always the same: you don’t blow up because you’re dumb. You blow up because you act like you’re invincible.
The truth? The market doesn’t give a damn how smart you are. It doesn’t care if you studied under Soros, built a quant model with 99% backtested perfection, or “felt it in your gut.” If you size wrong, you die—end of story. Doesn’t matter if you were right 9 times out of 10—if that tenth hit wipes you out, your edge is a fantasy. You’re a ghost typing Twitter threads about what would’ve worked.
And that’s the dirty little secret nobody wants to admit. Most traders don’t lose because of bad ideas. They fail because they press too hard when they feel good, and freeze when they should press. They size on emotion, not math. On ego, not survival.
Go big or go home? No—go small and stay in the game. Real killers don’t get high on their trades. They size to survive, not to show off. Do you think Druckenmiller got rich by taking on excessive leverage like some TikTok gambler? No. He bet big when the stars aligned—but he lived to bet big because he sized smart before that moment came. There’s a difference between bold and stupid. Most traders can’t tell.
Your edge isn’t your chart setup, your macro thesis, or your AI scanner. It’s your control over risk. That’s it. If you can’t manage exposure, the market will manage it for you—with a bullet to the head. And the coroner’s report will read: “Death by position size.”
So here’s the final truth, no sugarcoat:
Size wrong, and every win is just borrowed time.
Size right, and even your losses serve you.
Ignore it, and you’re not a trader—you’re a statistic waiting to be added to someone else’s lesson.
Position sizing is the strategy.
It’s the last line of defence between you and the abyss.
Respect it—or get buried with the rest of the jackasses.
