Van Tharp Explains How Position Sizing Can Make or Break a Trader

by Donald Harder

Successful stock traders are risk-takers who live on the edge, pick their teeth with rusty nails, bet the family farm and are just generally smarter and luckier than say your average accountant type, right? The reality is, Rambo only dodges every bullet in the movies and traders who don’t manage their risk by managing position size end up getting shot by the markets and their trading accounts end up getting emptied by those who have strategies in place that are designed to help them through the long haul.

Van Tharp’s strategies are not sexy, nor are they all that fun an exciting to learn, but what is exciting is the results such a relatively simple system can have on your trading account.

Van Tharp’s CPR For Traders Position Sizing System Formula

In the video lecture below, Van Tharp discusses his CPR for Traders System. We’re providing the summary of this formula below, but we’ll let you watch the video for Tharp’s explanation of how it works and how you can employ this strategy in your own trading account:

R = Risk Per Unit
C = Cash or Total Risk Per Position
P= Position Size or How Much

Forumla: P=C/R

Position Size = Cash/Risk Per Unit