How Market Wizard Caps Risk And Neutralizes Drawdowns

Basso minimizes drawdowns by capping each position's risk at a fixed ceiling and trimming winners rather than predicting market direction.

• Three-step strategy: Basso's framework is always: (1) why buy, (2) where to enter/exit via volatility-based stops (e.g. Keltner bands, 21-day ATR), (3) position size by equity, not round numbers—computers handle 89 shares as easily as 100.
• Risk-based sizing: He caps initial risk per position at ~0.5% of equity, letting winners run to ~1% before trimming back, which minimizes (not eliminates) drawdowns without closing out trending winners.

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