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0:00 The market is a place where a man's fortune is not made by how often he is right, but by how much he has left after he is wrong. That is why the first and greatest rule in speculation, the rule that sits above all others, is the rule of position sizing. You may search for a thousand rules about entries, exits, charts, tips, and timing. But you will always come back to this one. A man can be right about the direction of a stock and still lose everything if he has sized his position wrong. He can be wrong about the direction, but if his size is disciplined, he will live to fight another day. And the only fight that matters in this business is survival. If you cannot survive, you cannot profit. And if you cannot profit,
0:47 then you have no business speculating. I have seen more men ruined not by being wrong but by being wrong with too much. They wanted to get rich on the first swing. They believed the market owed them something for their cleverness, for their information, for their confidence. But the market owes you nothing. It does not care if you are smart, bold, or certain. It does not care about your debts or your dreams. It only cares about your capital. and it will strip it from you the moment you place it in harm's way without protection. Position sizing is protection. It is not glamorous. It does not make the headlines. Nobody boasts in the bucket shops about how small they bet or how cautious they were. But those who last,
1:33 those who accumulate, those who become rich, they all whisper the same thing. Size is survival and survival is profit. You may hear a man say, "I knew that stock would go up, but I was shaken out by margin calls." What he really means is, "I was too big for my capital." Another will say, "I was right, but I couldn't hold." That is the voice of a man who put too much on the line. Being right is useless if your size does not allow you to sit still. The market demands patience. But patience is only possible if your position is sized so that the daily jiggles, the sudden drops, the unexpected moves do not force you out. You cannot be patient if your heart is in your throat every tick. You
2:19 cannot let your profits run if every down tick feels like ruin. You cannot cut your losses if the size is so large that you refuse to admit the mistake. The whole game comes back to size. Now many beginners think size is about greed. They think if I double my size, I will double my profits. But what they do not see is that they also double their danger. They double the weight on their nerves. They double the chance that a small mistake will become a fatal one. Speculation is not arithmetic. It is psychology. You may hold 100 shares comfortably, but 1,000 shares may break your back even if the stock moves the same way. Your brain will not work the same when you are too large. You will not see the
3:05 market. You will only see your money bleeding. You will not follow your rules. You will follow your fear. A man who is oversized is already beaten because he will act not as a speculator but as a gambler. The gambler bets because he must. The speculator bets because the odds are right. The only way to stay a speculator is to size yourself so that you are never forced, never desperate, never over your head. I have always said it is not the market that beats the man. It is the man that beats himself. And the weapon he uses most often is his own greed expressed through size. How many fortunes have been lost because a man wanted to make a killing instead of a living? How many houses gone? How many wives left? How many men
3:52 ended up on the street? Not because they lacked brains, but because they lacked the discipline to size their trades. It is not knowledge that saves you. It is not courage. It is not tips. It is size. A small position can be corrected. A small loss can be endured. A small mistake can be forgiven. But when the size is too large, no forgiveness is possible. The market does not forgive and it does not forget. The trouble is most men cannot stand to think small. They dream of millions but they do not dream of the slow climb. They want the fortune in a season, not in a lifetime. And so they take a large position because they believe that if they are right, they will win so much that they will never need to work again. But here
4:39 is the trap. When you take a position that is too large, you are already wrong. No matter what the stock does, even if it moves in your favor, you will not be able to manage it with calm. You will take profits too soon because you are afraid of losing. You will not pyramid correctly because you already have too much. You will not be able to act like a general commanding his troops. You will be like a prisoner dragged by them. And sooner or later, that will be the end of you. I learned this lesson the hard way as all true lessons in the market are learned. I had been right on direction, right on timing, right on the story, and yet I went broke how? Because I was too big. When the market turned against me for
5:25 just a short spell, I was forced to liquidate. I did not go broke because I was wrong. I went broke because my size did not allow me to be right. That is the cruel trick the market plays. It is not enough to be correct. You must be correct with the proper size. If your position does not match your capital, your nerve, your plan, then your correctness is worthless. There is a simple way to look at it. Your position should always be small enough that you can sleep at night. If you cannot sleep, your size is too large. If you are staring at the tape all day, unable to look away, your size is too large. If you cannot leave the market alone for fear of what might happen, your size is too large. A man
6:10 who is properly sized can walk away. He can let the market do its work. He can wait. And waiting is the hardest but most profitable part of this game. Another mistake men make is pyramiding too fast. They put on a position, it works, and they rush to double and triple it. They think they are building a fortune, but they are building a trap. Pyroiding is only wise when the market pays you to do it. You must let the profits finance the new position, never your original capital. If you add with your winnings, your size grows safely. If you add with your stake, you are gambling, not speculating. It takes iron discipline to add only when the market gives you permission. But that is the only way to pyramid
6:55 without ruin. Do not think that position sizing is only for the poor or the cautious. Even the richest speculators, even the boldest traders, they all live and die by their size. The great operators were not reckless. They were daring, yes, but their daring was calculated. Their size always controlled. They could take the large lines because they had the large capital. They did not confuse courage with recklessness. They could scale in and scale out because they had mastered the art of putting on size in proportion to their account and their conviction. That is why they lasted. That is why their names are remembered. The bucket shop boys who went for broke, their names are dust. Do not be fooled by the
7:41 talk of quick killings. A killing can be made, yes, but not by the man who tries to make one on every trade. The man who makes a killing is the man who has survived long enough to be present when the big move comes. And survival again is only possible through proper sizing. Every big move that ever made a fortune was first endured by small moves that tested patience. And the man who held through those tests did so because his size allowed him to hold. If he had been too large, he would have been shaken out. The market always shakes. The only question is whether you are strong enough to take it. And strength does not come from muscles or courage. It comes from being small enough to last. There
8:26 is another danger in size and that is the temptation to average down. A man who starts small can cut his loss and move on. But a man who starts too large is tempted to throw good money after bad. He cannot admit he is wrong because admitting it would mean too large a loss. So he buys more. He says he is lowering his average, but he is really raising his risk. And the market, which punishes pride more than anything else, will usually finish him off. A small loss is a bruise. A large one is a bullet. If you keep adding to a losing position because you started too large, you are digging your own grave. Speculation is not about being bold in size. It is about being bold in patience. It is not about betting all,
9:12 but about waiting for all. The position size is the foundation of your house. If it is weak, the storm will take it. If it is strong, you can build on it. Without it, nothing else matters. I do not care how good your system is, how sharp your analysis, how perfect your timing. If your size is wrong, you are finished. And if your size is right, you can survive even your mistakes. That is the irony of this business. The smaller you bet, the bigger your chances of getting rich. The larger you bet, the quicker your chances of going broke. The beginner thinks the opposite. He thinks the bigger he bets, the sooner he will be rich. But speculation is a profession, not a lottery. A profession requires you to last. It requires you to
10:00 accumulate slowly. It requires you to respect your capital more than you respect your opinion. And respecting your capital begins and ends with the size of your position. I repeat, because repetition is the mother of truth, size is everything. Not tips, not timing, not inside dope, not opinions, size. If you remember nothing else, remember that. Make your positions so small that you can take them, cut them, carry them, add to them, all without strain. Make them so small that you can follow your rules without fear. Make them so small that the market cannot shake you out with its tricks. Make them so small that you can stay in the game long enough to see the real move. The move that makes your fortune.
10:45 You can only get rich in the market if you first refuse to go broke. That is the law and it is enforced without mercy. The market is patient. It will wait until you have forgotten this rule. Then it will strike. But if you never forget it, if you always respect your size, then you can stand before the market without fear. And the man who does not fear is the man who profits. The ability to hold your nerve depends not on courage but on the comfort of your size. Men think nerves are a gift like strength in the arms or steel in the backbone. But nerves in speculation are not about nature. They are about position. You may be the calmst man in your daily life, unshaken by insult, steady under fire. But if you put too
11:32 much of your capital into a trade, the market will make a coward of you. It will turn the calmst gentleman into a trembling wreck. It is not the ticker tape that drives men mad. It is their own oversized wages. When a man is too big for his account, every small move looks like disaster. Every little jiggle looks like catastrophe. Every whisper on the street sounds like a death sentence. He begins to watch every tick. He cannot eat. He cannot sleep. His heart pounds at each fluctuation. And when a man is in that state, he can no longer think. He can no longer plan. He can no longer follow his rules. He has lost his nerve. Not because he was born weak, but because he sized his trade too large for
12:17 his comfort. The market does not ask you to be brave. It asks you to be consistent. You do not need the courage of a soldier charging into battle. You need the discipline of a banker counting money. Discipline is only possible when your size allows you to keep your head. Too many men confuse courage with recklessness. They think taking the largest position they can muster is a sign of strength. They confuse boldness with wisdom. But what really happens is that their size destroys their judgment. And judgment is the only weapon a speculator has. I have seen men take enormous lines, boasting of their courage, only to cut them at the first dip. They did not cut because they were disciplined. They cut because they were
13:03 terrified. Their size forced them into panic, and panic is never profitable. On the other hand, a man who sizes correctly can watch the same dip without alarm. He knows what his risk is. He knows what his capital is. And he knows the market cannot push him into ruin with a small setback. He can sit calmly letting the market do its dance because his position is comfortable. That is what comfort means in this business. The ability to sit and sitting more than anything else is where the profits come from. Most fortunes were not made by quickin and out trading but by sitting through the big move. The market may go up and down. It may test your patience. It may tempt you to act. But the real
13:49 money comes to the man who can sit through all that without flinching. And you cannot sit if your size is choking you. Think of the gambler at the roulette wheel who bets half his stake on one spin. He is brave, but he is a fool. If the ball lands against him, he is finished. He is out of the game. What courage is there in that? It is suicide disguised as boldness. The wise gambler bets a size that lets him stay at the table spin after spin until the odds turn. He may lose a few rounds, but he is still in the game. The speculator must think the same way. You do not need to risk everything to show courage. You need to risk only what you can afford to lose without losing your reason. The true nerve lies not in the size of the
14:35 stake, but in the size of the reserve. I have seen speculators in the bucket shops, young and full of fire, who believed courage alone would win the day. They doubled and tripled their size, shouting to the crowd that they would clean out the house. But when the ticker ran against them, they were white as ghosts, begging the clerks for time, selling everything at the worst moment. Their courage had vanished, because courage cannot stand against a position too large for the pocketbook. They went broke not for lack of brains but for lack of sizing. The market exposed them as it always does because the market is the greatest examiner of human nerves and it always finds the weak spot. The weak spot is
15:20 not fear but size. When your size is proper, you will discover that you do not need to be brave at all. You do not need to grit your teeth or steal your heart. You will simply watch, waiting for your plan to work. The little losses will not disturb you. The small fluctuations will not shake you. You will have no temptation to snatch at small profits because you are not desperate. Desperation is the child of oversizing. It makes a man sell too soon. Buy too late. Change his system. Abandon his rules. Chase tips. A comfortable size keeps desperation out of your blood. It makes you steady. And steadiness is worth more than any tip or any chart. Many men never understand this truth. They think the secret to
16:07 nerves is in the man, not in the money. They read stories of great operators who held their lines through panics. And they think those men were born with iron wills. But the secret was never willpower. The secret was always size. Those operators had sized their lines according to their capital. They could hold because they were not drowning. They looked calm because their positions were comfortable, not because they were superhuman. A speculator who sizes correctly can look just as calm, no matter his nature. You can give a nervous man the right size and he will act like a veteran. You can give a veteran the wrong size and he will act like a child. Ask yourself this, what is the point of courage if it cannot keep
16:53 you in the market? What is the use of boldness if it drives you out too soon? The only real courage in speculation is the courage to wait. And waiting is only possible when you have not overburdened yourself. The man who is carrying too much cannot wait. He must act and usually at the wrong moment. He must snatch at safety and the market punishes him for it. The market always punishes the man who cannot wait and the inability to wait always comes back to size. I have said before that the market is never wrong. Opinions are when your size is too large. Your opinion becomes your prison. You cannot change it because changing it would cost too much. So you sit not out of patience but out of paralysis. You tell yourself you are
17:41 holding with nerve but you are holding with fear. The market sees it and will break you. True holding comes from comfort. It comes from knowing that if the market proves you wrong, you can take the loss and move on. That knowledge makes you calm. That calm is what men mistake for courage. It is easy to say, "I will be disciplined." When your size is small, it is impossible to be disciplined when your size is too large. The size controls the man, not the other way around. If you wish to control yourself, control your size. That is the number one rule, the first law of speculation. When your position fits your capital, your nerves will be steady. Your judgment will be clear. Your patience will be natural.
18:28 You will not need to force yourself into discipline. Discipline will flow from your comfort. And only then can you truly speculate because only then can you see the market without the fog of fear. Size is not about greed. It is about control. Control of losses, control of nerves, control of decisions. Too many men step into the market with the wrong idea that the bigger they play, the bigger their chances of striking it rich. They imagine size is the lever that multiplies their fortunes. But the real purpose of size is not to make you rich in a hurry. It is to keep you steady so that you can build wealth over time. If you look at the men who last in speculation, the men who grow their stake year after year,
19:13 you will see that they are not controlled by their trades. They control their trades. And that control begins with size. The speculator who sizes properly is like a general who never commits his whole army to the first skirmish. He holds reserves. He measures his strength against the enemy. He advances when the odds are in his favor, and he retreats when the tide turns. He does not throw all his men into battle at once because he knows that a lost battle is not the end of the war as long as he still has troops in reserve. A trader who puts too much money into a single position has no reserves and therefore no control. The market turns against him and he is beaten before he has a chance to regroup. He may think he
19:59 is bold, but in truth he has handed control over to the market. Control of losses is the first duty of proper sizing. Every man who speculates must understand that losses are part of the game. You cannot avoid them. You cannot wish them away. You cannot prevent them by cleverness or by courage. The only thing you can do is make sure they are small enough not to you. And that is entirely a matter of size. A small position that goes wrong is a scratch, a lesson, an inconvenience. A large position that goes wrong is a disaster. It wipes you out or leaves you so wounded that you cannot fight again. If you can cut a loss quickly and without hesitation, it is because the loss is bearable. If you cannot bring
20:45 yourself to cut it, it is usually because the position is too large. Size determines whether you can obey your rules or betray them. Then there is control of nerves. A man who has control of his nerves can see clearly. He does not chase the tape. He does not listen to rumors. He does not jump in and out in panic. He watches. He waits. He acts when the time is right. But nerves are not a gift of birth. They are a function of comfort. And comfort comes from proper sizing. If your position is well within your means, every tick does not feel like a threat. A two point move against you does not shake your confidence because it is not large enough to do serious damage. But if you are oversized, a two point move looks
21:31 like the end of the world. Your nerves fray, your vision blurs, and you start acting not on reason but on fear. Fear is the enemy of every trader. And it comes into play when the size is too large for the stomach to bear. Control of decisions follows naturally from control of nerves. If you are calm, you can think, you can follow your plan, cut your losses, pyramid your profits, wait for the right moment. If you are in a panic, you cannot think. You break your rules. You snatch at profits. You hold losers. You average down. The decisions that ruin traders are almost always born of fear. And fear is born of poor sizing. A trader who puts on a line that is comfortable for his account can act with detachment. He is not tied up in
22:19 the outcome of every tick. He can make decisions based on the market, not based on the size of his losses. In other words, he is in control. Greed blinds men to this truth. Greed whispers that more size means more profits, forgetting that more size also means more danger. Greed convinces a man that if he is right, he should bet everything on it. But greed never considers what happens if he is wrong. And in speculation, wrong comes more often than right. The difference between winners and losers is not that winners are never wrong, but that winners keep their wrongs small. Losers let their wrongs become ruinous, and they do so because their greed made them too big. Greed wants the quick fortune. But speculation punishes greed
23:06 more than anything else. The man who sizes for greed is already half beaten because he has given up his control. Think of a man sitting at a card table. He may have the best hand in the room, but if he bets his entire role on that hand, he has no control left. One unlucky card, one twist of fate, and he is out of the game. The smart card player never pushes everything forward unless he is prepared to leave the table for good. He sizes his bets so that he can withstand a run of bad luck. He knows that one hand does not make a career. The speculator must think the same way. No one trade makes your fortune, but any trade can end it if your size is wrong. Control is more important than victory in a single
23:51 trade. Because control is what lets you live to fight again tomorrow. Now consider paramiding. The only safe way to build a position is by using the market's profits to pay for your increase. That is control. If you add to your position with money the market has already given you, you are never overexposed. You are playing with winnings, not with your stake. But if you pyramid with your original capital, you are letting greed, not control, dictate your size. You are building a tower on a weak foundation. And when the market shakes, and it always shakes, the tower will collapse on you. Paramiding is a tool of control when done correctly, and a tool of destruction when done by greed. Another
24:36 form of control that comes from proper sizing is patience. A small position allows you to wait. You can let the market confirm your view. You can let the move develop. You can hold through the minor reactions. Patience is not a virtue. It is a byproduct of comfort. A man who is too large cannot be patient. He feels every moment as a crisis. He must act and usually at the wrong moment. Impatience ruins more traders than ignorance ever did. And impatience is nothing more than the voice of discomfort caused by poor sizing. Control also shows itself in independence. When your size is too large, you will find yourself hanging on the words of others. A tip, a rumor, a headline, anything that gives you hope
25:22 or fear will sway you. You are no longer thinking for yourself. You are letting the crowd think for you. But if your position is comfortable, you can ignore the noise. You can trust your own judgment because you know that a bad outcome will not destroy you. Independence of mind is a mark of every successful speculator. And independence begins with size that allows you to stay in control. The man who thinks size is about greed is like a horseman who thinks speed is about whipping the animal harder. He may get a burst of motion, but he will not get far before the beast collapses. The horseman who understands control will ride smoothly, steadily for miles, while the other is left in the dust. In speculation, the
26:08 man who sizes for control outlasts the man who sizes for greed. Outlasting is everything because the market always gives opportunities, but only to those who are still in the game. Size is not a weapon to win battles. It is the shield that lets you fight them. The men who get rich are not those who bet the most, but those who bet in a way that kept them steady. Steadiness is the hidden edge in speculation, and it comes from control. Every man has greed inside him, but not every man learns how to master it. The way to master it is not by wishing it away, but by sizing your positions so that greed cannot tempt you into ruin. Control your size and you control yourself. Control yourself and you can control your trading. A man who
26:55 sizes right can sit still. A man who sizes wrong must always run. That is the difference between the winners and the losers in this game. The market pays the man who can sit and it destroys the man who cannot. But sitting still is not about patience alone. It is about the comfort of your position. If your size is proper, you can wait. If your size is too large, you will be forced to run from every shadow. Men often talk of courage and nerve. But the truth is that most of what they call nerve is simply the ability to sit without strain. And strain comes from size that is out of proportion to capital and temperament. The great moves, the kind that make fortunes, take time. They do not unfold in a day or a week. They build slowly,
27:43 testing the nerves of everyone who rides them. There are reactions, setbacks, fence, false breaks, shakeouts. The man who tries to capture these moves with a position too large for his means cannot hold on. He may be right about the direction, but the market will scare him out before the big swing comes. He will run because his account or his mind cannot take the strain. And when he runs, the market wins, not because it was against him, but because he was against himself. The ability to sit still, to wait for the market to complete its work, belongs only to the man whose position size is right. You can see this truth in the tape rooms, in the bucket shops, in the exchanges. The men who are over committed pace the
28:29 floor like trapped animals. They whisper for news. They curse the fluctuations. They are always waiting for the clerk to call their margin. They are never at ease, and so they never sit still. They dart in and out, covering here, buying there, always acting, never waiting. Their very size forces them to run. On the other side of the room, you might see a man who is calm, who watches without excitement, who can leave his desk for lunch without fear. That man has sized correctly. He can afford to let the market breathe. He is not frightened by a small reaction because his position is comfortable. He can sit still and in the sitting comes the profit. The small fluctuations are the ruin of those whose size too large. A
29:16 twopoint drop means little to the man who has a modest line. But it means disaster to the man who has his whole fortune tied up in it. The small move that is only noise for one is terror for the other. And terror always forces action. The man who is terrified cannot sit still. He must run. He must sell too soon or hold too long. But in either case, he loses. The market is designed to frighten men out of their positions before the real move begins. And the only way to resist the design is to sit. The only way to sit is to size correctly. The importance of sitting still is not a new lesson. It is as old as speculation itself. But generation after generation forgets it. Men think they will outsmart the market with
30:02 cleverness, with quick trades, with constant motion. They imagine they can dart in and out catching every little fluctuation. But the profits are not in the fluctuations. They are in the big swing. And the big swing can only be caught by sitting. If you are too large, you cannot sit. You will always be forced to take action when none is required. The market loves to make fools of such men and it never fails. You must understand that the market is a machine designed to shake you out. It does not rise in a straight line. It climbs by shaking. It throws men off with false breaks, with violent reactions, with sudden drops. It tests every holder. Only those who can sit through these tests take the prize
30:47 at the end. The rest run, not because they wanted to, but because their size gave them no choice. If you are carrying too much, you cannot sit through a shakeout. Your nerves will betray you, or your margin will. But if you are sized properly, you can ignore the tricks. You can sit and by sitting you can ride the full move. It is not enough to be right about the market. You must be right in a way that allows you to profit. Many men predict the market correctly and still lose. They lose because they could not sit still. They could not sit still because their positions were too large. They were forced to act by their fear or by the broker's call or by the drain on their capital. A man who sizes properly can be
31:34 wrong for a time and still win in the end because he can afford to sit until the market proves him right. A man whose size is too large can be right in the long run and still lose in the short run because he cannot survive the waiting.
