Sizing for Volatility

Why a calm stock and a wild stock shouldn’t get the same number of shares, and how the average true range turns volatility into a sizing rule.

Not all stocks move alike

A large, steady consumer company might move about 1% on a typical day. A young growth stock or a crypto-related name might move 5% or more. If you buy the same dollar amount of both, the volatile one will dominate your results, both the good days and the bad.

Volatility-based sizing fixes that by giving volatile stocks fewer shares and calm stocks more, so that each position carries a similar amount of risk.

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