Some traders focus only on finding the perfect setup…
But even the best trade idea can fall apart if you get one key decision wrong.
As far as perfect trade setups, I know which one I rely on over and over again…
The first trading session of the week offers up one of the best ones out there.
Every Monday, the market kicks back into gear after a weekend of rest… And that reset creates a unique opportunity!
Right at 9:30 am Eastern, as the opening bell rings, we look for a very specific pattern that often shows up like clockwork.
And it has delivered some incredible wins!
Take this past Monday…
Equillium Inc. (NASDAQ: EQ) had a morning run of 155%* after announcing a large capital infusion.
These are the kinds of morning spikes we hunt for every Monday!
Want to learn how to spot them for yourself?
Watch the video below for the full trade breakdown and strategy tutorial for my Monday Setup.
That key decision that so many traders get wrong can quietly limit your growth, drain your capital, and even force you out of winning trades too soon.
Most beginners don’t realize how much it matters until it’s too late.
Before we get to solving that problem, take this short quiz to see how vulnerable you are to making this common mistake…
- You’ve spotted a strong setup you love, but another hot play pops up mid-day. Do you:
- A) Sell your current winner to jump into the new one
B) Hold your winner and miss the second trade
C) Have enough capital ready to take both - You buy a $2 stock with 50 shares, and it doubles in a week. How much have you made?
- A) Enough to change your month
B) Enough for lunch
C) Not worth the risk you took - A low-float stock is swinging wildly — $5 one minute, $8 the next. What’s your move?
- A) Go all-in to capture the big moves
B) Use a smaller position size to control risk
C) Avoid it entirely - Your broker offers margin. You’re new to trading. Should you:
- A) Use it to double your buying power
B) Ignore it until you’ve built more experience
C) Only use it for “can’t miss” trades
Here’s the answer key:
- 1: C
- 2: B
- 3: B
- 4: B
If you missed more than one, you might be capping the profit potential on your account. Let’s fix that.
Table of Contents
Why Position Sizing Matters
Position sizing is one of the most important skills for traders at any level.
If you’re new to the market, chances are you’re working with a smaller account, which means your sizing decisions can make or break your growth. Knowing how much capital to commit to each trade is critical for balancing growth potential with proper risk management.
Start With Capital You Can Afford to Lose
Before anything else, never risk money you can’t afford to lose.
If you’re just starting out, mistakes are inevitable — it’s part of the learning process. The last thing you want is to blow up your account because you were trading with rent or grocery money.
Use only capital you can afford to put at risk.
Small Accounts Require a Different Approach
It might sound counterintuitive, but if you want to grow a small account, you’ll need to be more aggressive than a traditional finance textbook recommends.
Ultra-conservative sizing may protect you, but it also slows progress to a crawl. For example, if you score a 50% gain on a $2 stock but only own 50 shares, it will take a long time to reach your account growth goals or pass the PDT rule threshold.
I recommend committing about 50%, but no more, of your account value on most trades, which is just enough to make progress without tying up all your buying power.
So why not use 80–100%?
The biggest reason is opportunity cost. If you put nearly all your capital into one trade and another great setup appears, you might have to sell a winning position just to take it.
That often means cutting a stock that’s breaking resistance, holding high volume, and doing everything right. Exiting the trade that’s working limits your upside.
By keeping reserve buying power, you can take advantage of new opportunities without sabotaging your best trades.
Margin Is a Tool, Not a Crutch
If you use a margin account, “half” means half of your cash buying power, not your margin-boosted total.
Margin is like a table saw…
It’s very powerful when used correctly, but dangerous if you don’t know what you’re doing.
New traders should stay away from their margin account and stick to their cash balance until they’ve built up more experience.
Adjust for Volatility
Position sizing should also match the stock’s volatility.
50% isn’t a hard and fast rule…
If you’re trading a high-flyer with a huge daily range, you may want to use less than half your account to avoid getting shaken out.
Low-float stocks can move dramatically, sometimes from $4 to $90 in just a couple of days, so a smaller size can still produce meaningful gains.
Always factor in the stock’s daily range when deciding your position size.
Don’t Forget About Commissions and Fees
Most beginners start with commission-free brokers like Robinhood and others, which is what I recommend for new traders..
That being said, once you scale up or start short selling, a paid broker is often worth the switch. Just remember to account for per-share costs, borrow fees, and other charges.
These little bites can eat into your profits quickly, especially if you’re scalping or trading small moves.
If you’re paying per-share fees, consider negotiating with your broker as your trading volume grows.
My Final Thoughts…
Position sizing is a balancing act…
You need enough size to grow your account meaningfully, but not so much that you risk blowing up or missing other opportunities.
Be aware of volatility, keep some buying power in reserve, avoid relying on margin early on, and always factor in your costs.
Nail this, and you’ll set yourself up for stronger results on your very next trade, and for lasting success in the market.
Have a great weekend, everyone. See you back here on Monday.
Tim Bohen
Lead Trainer, StocksToTrade
P.S.
One of my latest watchlists is based on a major event from last week.
And another big headline put these names on my radar.
You shouldn’t be trading without this data.