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Here’s a question I get all the time…

What should my position size be?

The honest answer is that each person needs to answer that question individually for themselves and their own account.

But I’ve developed a framework that cuts through all the noise and gets right to the heart of what really matters — your emotional capacity to handle losses, which come with the territory in trading.

Most traders get caught up in complex formulas and percentages, but they’re missing the bigger picture. The real battle isn’t mathematical — it’s psychological.

That’s why I use what I call the 10-loss rule to determine my position sizing.

The Worst-Case Scenario Framework

Here’s how it works…

The question I ask myself is simple: If I put X amount in and lost 10 times in a row, would that completely throw off my whole year? Would it put me in a downward spiral where I’m losing my mind?

Let me give you my personal example to illustrate this with a $500k trading account.

If I put down $50,000 per trade and lost 10 in a row and a half-million bucks, I would probably get punched in the face by my wife first and foremost — and that’s before I even get to how it would affect me mentally.

The emotional toll would be devastating, and I’d probably make even worse decisions trying to recover.

On the flip side, if I lost $500 10 times in a row, I’m OK. I can live to fight another day. That’s $5,000 total — manageable, survivable and most importantly, it won’t send me into an emotional tailspin that destroys my trading discipline.

Why This Approach Works

This isn’t just about protecting your account balance — though that’s obviously important. It’s about protecting your psychology. When you know you can handle the worst-case scenario, something powerful happens…

You stop interfering with your trades.

Think about this: How many times have you cut a winning trade short because you were afraid of giving back profits, only to see it continue rising?

How many times have you held onto a loser too long because the loss felt too painful to accept, and you were just holding out hope for a rebound?

When your position sizes are appropriate for your emotional capacity, you can let the trade do the work instead of sabotaging yourself with fear-based decisions.

The beauty of this approach is its simplicity. You don’t need complicated risk management software or advanced mathematical models. You just need honest self-reflection about what you can actually handle when things go wrong — and they will go wrong sometimes in trading!

Before you place your next trade, ask yourself the hard question…

If this amount times 10 disappeared from my account, could I still show up tomorrow with a clear head and stick to my strategy? 

If the answer is no, then consider scaling down appropriately.

Graham Lindman
Graham Lindman Trading

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*This is for informational and educational purposes only. There is inherent risk in trading, so trade at your own risk.