The Father’s Notebook: The Formula Hidden for 20 Years
Position sizing is one of the most important risk management concepts in investing. In this short story, a Father’s Day discovery becomes a simple way to understand why protecting capital matters more than chasing returns.
- The Gift Nobody Expected
- The Formula Most Traders Ignore
- The Lesson Inside Losses
- The Real Father’s Day Gift
The Gift Nobody Expected
Father’s Day had brought the Sharma family back to their ancestral home in Dehradun. The plan was simple: lunch, family photos, and a few stories from the past.
But while cleaning the attic, sixteen-year-old Riya found something unusual, a dusty notebook with the words “Do Not Open Until I Am Ready.” The handwriting belonged to her father, Rajesh Sharma, a civil engineer known for fixing everything except his old cupboards.
The family gathered around. Riya grinned. “Too late, Papa.”
Laughter filled the room.
Inside were handwritten entries dating back to nearly twenty years. Some pages contained family expenses. Some had bridge sketches. Then everyone noticed something strange: stock market calculations, dates, percentages, arrows, and one line repeated again and again.
Protect capital first. Returns come later.
Riya looked up. “Papa, you never told us you traded.”
Rajesh smiled awkwardly. “I didn’t trade much. I mostly studied.”
His younger brother laughed. “For twenty years?”
Rajesh nodded. “Because one concept changed how I looked at investing.”
At the top of the page was written:
Position Sizing
The Formula Most Traders Ignore
Everyone expected a complicated explanation. Instead, Rajesh asked a simple question.
“If you lose fifty percent of your capital, how much return do you need to recover?”
Nobody answered.
Riya guessed, “Fifty percent?”
Rajesh shook his head. “You need one hundred percent.”
The room went quiet.
He continued, “Most people focus on finding winning stocks. They should first focus on surviving losing trades.”
Then he opened the notebook and showed an old formula:
Position Size = Account Risk ÷ Trade Risk
Riya frowned. “That sounds technical.”
“It is,” Rajesh said. “But it is also simple.”
He explained: if capital is ₹5,00,000 and the trader risks 1%, then account risk is ₹5,000. If the stop loss is ₹10 away from the entry price, the position size becomes 500 shares.
“So position size changes based on risk?” Riya asked.
“Exactly,” he said.
The Lesson Inside Losses
Rajesh flipped to another page. Many entries showed losing trades. Riya looked surprised.
“You had so many losses?”
Rajesh laughed. “Of course. Every trader does.”
The family expected him to talk about profits. Instead, he pointed at the losses.
“These are why I survived.”
He explained that many traders follow the One Percent Rule, where maximum risk per trade is often kept around 1% to 2% of total capital. That approach helps reduce the chance of one mistake doing serious damage.
Then he wrote another formula:
Risk Reward Ratio = Potential Profit ÷ Potential Loss
“If a trade risks ₹1 to make ₹3, the ratio is 3:1,” he said. “Even if the win rate is not perfect, risk management can still matter.”
Riya stared at the notebook. “So investing isn’t about being right?”
Rajesh smiled. “No. It’s about managing what happens when you’re wrong.”
The Real Father’s Day Gift
Sunlight entered through the attic window. Nobody was thinking about gifts anymore.
Riya carefully closed the notebook. “For years I thought investing was about finding the perfect stock.”
Rajesh shook his head. “The perfect stock doesn’t exist. The perfect risk plan matters more.”
His brother smiled. “So all these years your secret weapon wasn’t stock picking?”
“No,” Rajesh said. “It was position sizing.”
Before leaving the attic, he added one final thought: when learning concepts like position sizing, risk-reward ratio, and capital management, simple tools can make the process easier. Platforms like the Navia All In One App help investors keep track of positions and manage trades more efficiently.
That evening, the family took their Father’s Day photograph. But the real gift was not the picture, or the lunch, or even the notebook.
It was a lesson written over twenty years:
Protecting money comes before growing it.
And just like a father protects his family first, a smart trader protects capital first.
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DISCLAIMER: This story is a fictional illustration created for educational purposes. Investment in securities market are subject to market risks, read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory. Brokerage will not exceed the SEBI prescribed limit. Full disclaimer: https://bit.ly/naviadisclaimer
