I studied abroad in Scotland at the University of Sterling.
Spent nearly a year walking through the Highlands. Saw Robert Burns' house. Studied classical poetry and Shakespeare before I ever touched a trading terminal.
Burns wrote a poem in 1785 called "To a Mouse." He was plowing his field when he unearthed a nest and destroyed the mice's home. The poem was his apology.
One line became immortal: "The best laid schemes of mice and men often go awry."
I put that phrase on screen Monday morning as the market gapped down. App Lovin buyers down 40. Microsoft longs getting killed. Meta holders getting blown up.
Your bullish plans just went awry. Now what the hell are you going to do?
This weekend, I want to explain the one lesson that separates survival from destruction.
Because while the Genesis Cog Scanner identifies the setups…
The Path to Enlightenment
I call myself Confucius sometimes. The path to enlightenment is admitting you know nothing.
I walk in every day not knowing what will happen. I just don't. All I do is look at setups and measure risk to the upside and risk to the downside.
Monday was a bloody day. The market was sick. I warned everyone on Friday that when we gap down, you're not getting out for months.
Here is what happened to my account on that bloody day.
I was down a quarter of 1%.
One position twisted me. But every other position held as well as it could in a terrible market. That is not luck. That is position sizing.
The Most Important Lesson From 39 Years
When people ask me what is the most important thing I have ever learned in 39 years, I give them the same answer every time.
Position sizing. It trumps everything.
It trumps MACDs. It trumps technicals. It trumps fundamentals. None of that matters compared to position sizing.
If your position sizing is wrong, goodnight. You're dead.
Here is how I allocate:
- My entry allocation is 3% to 4% of my portfolio
- When I get to 6% to 7%, I usually want out of almost all of it
- When I get to 10%, I am done completely
- It never gets to 10% because I will not let it
Even 5% is a push. I have three positions at 5% right now. Most of my positions are 3% to 4%. That is why I am sitting on 50% cash.
I refuse to up the ante on position sizing. Ever.
Why This Matters More Than Your Indicators
Your bias will not save you. Your MACDs will not save you. Your VIX will not save you. None of that will help you when markets go against you.
Only position sizing saves you.
You can withstand any market crash if your position sizing is small. You can withstand any gamma squeeze if your position sizing is small. That is a fact.
But if your position sizing is off, there is no tomorrow.
I have one position at 5.7% and it makes me bat crazy nervous. I do not like it. I am trying to get out of it. I am trying to lower it.
That is how I think about risk. Not predicting what the market will do. Sizing so I survive when it does whatever it wants.
What I Did When Plans Went Awry
Monday morning I watched managers panic sell defensive stocks at 8 multiples. They were selling low to buy tech high. That is insane.
I did the opposite. I loaded up on shorts. Sold dozens of positions on Friday. Liquidated Bristol Myers. Took gains everywhere I could.
Did I plan for this exact day? No.
But I positioned so that when plans went awry, I would survive. Robert Burns was right 240 years ago. Careful planning does not prevent unexpected events. It prepares you to withstand them.
The Genesis COG System tracks when momentum breaks and cycles roll over. But knowing the setup is only half the battle. Sizing correctly is what keeps you in the game long enough for those setups to pay off.
When everyone else was getting blown out on Monday, I was down a quarter of 1%. That is the difference position sizing makes.
Have a good weekend. Monday comes fast. Be ready.
Professor Jeffrey Bierman
Creator of the Genesis COG System