Position Sizing in Momentum Portfolios

Two investors run identical momentum screens and make identical entry decisions. One earns 30% for the year. The other earns 8%. The difference is entirely in how they sized their positions.

Why This Matters

Position sizing is the most under-taught and most impactful variable in momentum investing. It determines how much capital is at risk in each idea, how positions are scaled as they succeed or fail, and — critically — how the portfolio survives the drawdowns that are inherent to any trend-following approach. Most momentum investors focus intensely on stock selection and almost not at all on this dimension.