You followed the process. RS above 80, a rising RS Line, volume expansion on the breakout, stop placed below the base. The trade triggered — and then the stock reversed and stopped you out. Same thing on the next trade. And the five after that.
Six consecutive losses is not a system failure. Given any win rate below 70%, six losses in a row will happen to you multiple times per year. You cannot avoid it. The only question is whether your portfolio survives it intact enough to keep trading the same way when the edge starts working again.
Position sizing is the answer to that question.
The Survival Equation
Most traders think about risk as a dollar amount: "I'll risk ฿5,000 on this trade." The problem is that ฿5,000 means something different after a losing streak.
After 10 losses at ฿5,000 each, you have lost ฿50,000. Your portfolio is now ฿450,000, but you are still risking ฿5,000 per trade — that is now 1.11% of remaining capital instead of 1.00%. Each subsequent loss takes a larger fraction of what is left. Fixed-baht sizing accelerates damage. Fixed-percent does not.
When you risk a constant percentage of your current portfolio, the actual baht amount shrinks as the portfolio shrinks. The math adjusts automatically. You are never risking more of what remains than you originally decided to risk.
The MOEasymmetry system uses 0.25% risk per trade across a maximum of 10 open positions. At full deployment that is 2.5% of the portfolio at risk simultaneously — not 2.5% allocated to each trade, but 2.5% that would be lost if every position hit its stop on the same day.
The Formula
The arithmetic is a two-step calculation.
Step 1: Maximum loss in baht
Max loss = Portfolio value × Risk %
Step 2: Number of shares
Shares = Max loss ÷ (Entry price − Stop price)
The entry-minus-stop figure is the per-share loss if stopped out. Dividing the allowed loss by the per-share loss gives the number of shares that keeps you within your risk budget.
Worked example — ฿500,000 portfolio, 0.25% risk:
- Portfolio: ฿500,000
- Risk per trade: 0.25% = ฿1,250
- Entry price: ฿100
- Stop price: ฿94 (6% below entry — placed below the base low)
- Per-share loss: ฿100 − ฿94 = ฿6
- Position size: ฿1,250 ÷ ฿6 = 208 shares
- Capital deployed: 208 × ฿100 = ฿20,800 (4.2% of portfolio)
Capital deployed (4.2%) is not the same as risk (0.25%). Capital deployed is what you put in. Risk is what you lose if stopped out.
The formula self-adjusts. A tighter stop at ฿97 means a per-share loss of ฿3, so the position grows to 417 shares. A wide stop at ฿85 — fifteen percent below entry — means a per-share loss of ฿15, so the position shrinks to 83 shares. The baht risk stays fixed at ฿1,250 regardless of where the stop sits.
The Kill Switch Math
The system operates three drawdown gates: −10%, −15%, and −25% from equity peak.
At −10% you cut position sizes in half. At −15% you stop opening new positions — existing ones run, nothing new enters. At −25% you halt completely and review whether the edge itself has changed.
At 0.25% per trade, reaching −10% requires roughly 40 consecutive full-stop losses. That is the buffer. Not because such a streak is impossible, but because the sizing ensures a bad period does not breach the gate before you have enough observations to tell whether the system is broken or just cold.
The gates exist because a deep enough drawdown changes your behavior. You start skipping valid setups, sizing down irrationally, or revenge-trading to recover. The gates intervene before the damage reaches that psychological threshold. Position sizing limits each individual loss; the kill switches limit the cumulative damage across a streak.
Three Rules Before You Size Any Trade
1. Set the stop first. Always.
The stop comes from chart structure — the base low, a logical support level, the line below which the trade thesis is wrong. Once you have the stop, run the formula. Never reverse the sequence. Picking a share count first and then hunting for a stop to justify it is how small accounts get smaller.
2. If the stop is far, the position is small. Accept it.
A stock with a 15% base will give you roughly half the shares of one with a 5% stop. That is the correct answer. Do not override it by moving the stop tighter to make the position "worth trading." A stop placed to justify a larger position is not a stop; it is a number.
3. Do not size up to "make it worth it."
Every compelling trade carries the temptation: "Just 0.5% instead of 0.25% this time." Once you allow that logic, the rule has no floor. The value of a fixed percentage is that it requires no judgment in the moment. The formula runs, the number comes out, you buy that many shares.
Position sizing does not create edge. It preserves the edge long enough for the law of large numbers to work. With a 40% win rate and 2:1 reward-to-risk, expected value is positive — but only if you are still trading at trade 100, trade 200. A losing streak at the wrong size ends the game before that expectancy shows up in your account.
The formula is the arithmetic of staying in the game.
Related: [You Don't Need to Predict — You Need an Edge](/articles/trading-edge-casino-house-principle.html) | [How to Find Market Leaders](/articles/rs-line-leader-laggard-how-to.html)