http://optionalpha.com/show47 – One of the key elements to becoming a more successful trader is the ability to absolutely master risk management in options trading. And contrary to what you may assume, it boils down to a few simple things. Namely, determining an optimal position size range for each trade and sticking to it, never allocating the entire value of your account at once.

Simply put, don't invest too much money in each trade and always leave money left over to keep the operation going.

My goal today is simply to help you trade with more confidence. The kind of unwavering confidence to go out and start trading without fear of losses or destroying your account. For me, confidence comes from understanding the underlying math and reasoning behind optimal position sizes. Too often you hear or see other traders spouting allocation ranges without giving a clear explanation of WHY they chose that range.

If someone told me I should only use 10% of my account on each trade, I would ask why. Why this range and not something higher or lower? What is the reason for the 10%? You rarely get a clear answer.

The reality is that if you consistently enter high probability trades and stick to the optimal position size range we provide, the odds of your account going completely broke at some point are 1 in 28 trillion.

On today's show, I'm going to explain the math behind why I've been saying for 8 years now that you should never allocate more than 1-5% risk per trade. These aren't just some cool numbers I pulled out of thin air. There's a math and logic to it, and I'm going to break it down in detail on today's latest show.

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