The Six Percent Ceiling
On a $100,000 account, no position should exceed 6%-7%. Ever.
That is not conservative. That is the outer limit of acceptable risk.
When I enter a position, my allocation runs three to four percent. When it appreciates to six or seven percent, I start exiting. When it hits ten percent, I am completely out.
Most traders do the opposite. They let winners run until one position dominates their portfolio. Then they watch helplessly when that position reverses.
Why Indicators Cannot Save You
Consider what happened today.
The S&P broke underneath the algorithmic channel. The MACD rolled over. The RSI fell below 50. Every momentum indicator screamed the same warning.
Did knowing that save anyone who was overallocated?
It did not. Indicators tell you what is happening. Position sizing determines whether you can survive it.
I could withstand a 2,000 point drop right now. Not because I predicted it. Because my largest position is 5.7% of my portfolio. And even that makes me nervous.
The Math Nobody Teaches
Here is what I know after four decades:
- You can survive any market crash if your position sizing is small
- You can withstand any gamma squeeze if your position sizing is small
- You cannot survive either if your position sizing is wrong
The weekly reverse engineering MACD shows downside risk to 4,900 on the S&P. That is a 2,000 point drop from here.
Will it go there? I do not know. But if it does, my portfolio structure means I live to trade another day.
What 50% Cash Actually Means
Sitting on cash is not doing nothing. It is position sizing applied to the entire portfolio.
I refuse to up the ante when risk exceeds reward. That discipline is why I am down a quarter percent today instead of bleeding out like traders who bought every dip.
The algorithms do not buy dips. You do. They sell dips. They sell into the panic you create when you overallocate and then capitulate.
The Only Rule That Matters
Your MACD will not save you. Your VIX analysis will not save you. Your bullish bias certainly will not save you.
Position sizing saves you. Three to four percent on entry. Exit begins at six to seven percent. Never exceed ten percent under any circumstances.
The Genesis COG System builds this discipline into every trade alert. We identify the setup, set expectations, and size the position to match the risk.
Markets are setting up for something wicked. The traders who survive will not be the ones who called the top. They will be the ones who sized their positions correctly before it arrived.
See how Genesis COG builds position sizing discipline into every trade →
Professor Jeffrey Bierman
Creator of the Genesis COG System