Ed Seykota was recently asked:
“If you could give me ten rules to consider with respect to position sizing what would they be?”
“Ten rules for position sizing:
1. Bet high enough to make meaningful profits when you win.
2. Bet low enough so you are ok financially and psychologically when you lose.
3. If (1) and (2) don’t overlap, don’t trade.
4. Don’t go adding a bunch of rules that don’t work, just so you have ten rules.”
Of course, Seykota and others will use detailed rules for risk management, that’s not the point with his answer. I liked his #4 answer.