Every trader has a different risk tolerance, but for our Vector Ridge process I will give you clear, practical guidelines on sizing and risk.
Position sizing can't make a losing strategy a winning one, but it can turn a winning strategy into a losing one.
Chapter 6 works through the same discipline in full — sizing each position to 1–2% of capital, the three ways out of a trade, and why we never short.
PORTFOLIO ALLOCATION GUIDELINES
These are suggested maximum percentages of your total trading capital allocated to each asset class at any one time. The ranges allow flexibility based on your confidence and account size.
Where you sit inside each range should also reflect the prevailing macro regime — leaning fuller in Goldilocks or Reflation and trimming exposure in Stagflation or Deflation, as set out in Chapter 3.| Asset Class | Minimum Allocation | Maximum Allocation |
|---|---|---|
| Currencies | 8% | 15% |
| Equities | 4% | 8% |
| Commodities | 3% | 6% |
Gold counts as a currency in my book (stable, macro-driven).
BTC counts as a commodity (high volatility, speculative).
PER-TRADE RISK RULES
The most important rule in trading is preserving capital.
The conviction grades that drive these sizing decisions are built from both the signal and the macro backdrop, a process explained in Chapter 4 on grading your conviction (A–D).Grade A Assets
- Run larger positions (closer to max allocation) because we are happy to own them long-term
- Add to trades on new trades—enter at 8%, second signal hits go to 12%, third signal reach max 15%
- No hard stops or minimal stops—let winners run as long as momentum and macro remain supportive
- Trail profits loosely or exit only when the asset is downgraded or breaks trend
Lower-Grade Assets (B, C, etc.)
- Use smaller position sizes (less than Grade A)
- Tight risk management works well here: set hard stops and commit to your levels
- Take profits quickly
- This protects you from the unpredictability that comes with weaker trades
VOLATILE & LEVERAGED ASSETS
When trading volatile or leveraged assets (futures, forex, BTC), tight hard stops are essential to prevent small losses becoming account killers.
This matters most on the faster timeframes, where a Day Trade or Multi-Hour position can move against you in minutes — Chapter 8 covers why fewer than 1% of day traders stay profitable without that discipline.If gold is starting to act more like a commodity than a currency, treat it as such. Asset behavior can shift—adjust your risk management accordingly.
THE BOTTOM LINE
Risk management is not about avoiding losses—it's about making sure no single trade (or string of trades) can seriously damage your account.
Stick to these rules religiously, size according to Grade A conviction, and you will give yourself the best mathematical chance of long-term profitability.
Patient Swing Trade and Investing positions tend to reward this approach most, giving each setup room to work while strict sizing caps the downside — see Chapter 7 on why the swing window is the sweet spot.KEY TAKEAWAYS
- Max allocation by class: Currencies 15%, Equities 8%, Commodities 6%
- Grade A = larger positions with minimal/no stops, add on new trades
- Lower grades = smaller positions with tight stops and quick profits
- Preserve capital first — you can't trade if you blow up your account