Position sizing & market exposure

Stock selection and timing are only half of a rules-based system. The other half is portfolio construction: how big each position is, how it’s built, and how much of the account is exposed at all. This half is what determines whether a good year survives a bad month.

Concentration, not diversification

A focused growth portfolio holds its few best ideas — commonly five to ten positions, fewer in smaller accounts — rather than twenty diluted ones. The reasoning: truly qualifying stocks (all seven traits, a sound base, in a healthy market) are rare, and position twenty-three adds risk-of-neglect faster than it adds safety. Concentration is only survivable because of the hard stop: each idea’s downside is capped, so you don’t need dilution to sleep.

The app operationalizes this with slot sizing: the portfolio divides into a fixed number of equal slots, and every position is expressed as a fraction of one slot — which turns “how much should I buy?” from an emotional question into arithmetic.

Build positions into strength — pyramiding

A full position isn’t bought in one order. The classic scaling pattern: open with about half the planned size as the stock clears the pivot, add roughly 30% more if it advances 2–3% from the buy point, and complete the final 20% by up +5% — the top of the buy zone.

Pyramiding: the position only reaches full size if the stock keeps proving the thesis. Averaging down is the same picture inverted — adding size as the thesis fails.

Two things fall out of the shape. First, a failed breakout stops out a half-size position, not a full one — your worst entries are automatically your smallest. Second, the mirror rule: never average down. Adding to a loser is pyramiding a disproven thesis.

Scaling out works the same way in reverse: trim into strength (a partial sale in the profit zone) rather than exiting all in one decision.

Exposure follows the market

The single biggest sizing decision isn’t any one position — it’s how much of the account is exposed at all, and that keys off the market regime, not off predictions:

Exposure posture by regime. The bars are a posture, not a prescription — the point is the monotonic slope, not any exact percentage.

This is the discipline the app’s invested percent tracks on the Summary page, alongside portfolio heat — the total loss if every open position were stopped out today. Heat is the honest measure of exposure: two accounts can be equally “invested” while one risks 2% and the other risks 10%.

And it’s the discipline the attribution report audits after the fact: when your own closed trades show most gains came from uptrend entries and most losses from fighting corrections, the ladder above stops being theory.

Caveats

• Slot counts, add points, and the regime postures above are the commonly taught starting values, not laws. What matters is that your numbers are written down before the trade — the app grades you against your own recorded rules.
• Pyramiding assumes liquidity; in thin stocks the adds move the price against you.
• Our plain-English wording of publicly documented portfolio-management ideas; educational reference, not investment advice.