Increasing Your Position Size Over Time

[dam5h 10]

so far all this discussion has centered on trade to account risk.

 

what about the dynamics of the trade based on the system once the "trade to account ratio" method is adopted, whatever it may be.

 

if a trader uses 2 lots and does well by scaling out (helping to create a smoother equity curve), does that trader then go to 3 lots at a certain level; or wait until the level that would allow 4 lots. the 4 lots would obviously keep the multiple the same. with a different multiple the system changes and there are now several ways to scale out rather than 1: 2/3 then 1/3, 1/3 then 2/3, or 1/3, 1/3, 1/3

 

this isn't an argument about the merits of scaling out.

[Attila 10]

i do not advocate the numbers directly, but the scale. or maybe the process is a better term. it is something that i found early on and is given to me by a bond futures trader. its % of capital based on a risk

 

$5k to $7500 = 10% or $500

$7500 to $12500 = 7.5% or $600

$12500 to $20k = 5% or $625

$20k to $32500 = 3% or $600

$32500 to $50k = 2% or $650

$50K + = 1% or

 

Are these per trade?

[cuttshot 11]

This is always a great question to discuss. While there are many ways to increase your position size over time I like to take a very basic approach. I'm willing to risk no more than 3% of my account per trade. I will add size to my trading as I continue to build my account size.

 

It's important to know you market as well. As you continue to build size, you need to make sure you are trading a liquid market. Trading 5 contracts on CL is no problem but trading 25 contracts could lead to some issues. So obviously you will need to put in a cap at some point.

 

Bottom line is I have to keep things simple for myself. Sure you can use other methods out there that can get pretty deep into the numbers but I have to constantly remind myself of the KISS method. If I don't keep it simple I start to lose focus of executing my trade plan. This also means for most of my trading I'm all in and all out. I don't scale in or out of a position. It just makes it too difficult for me on the execution side of things. Not saying this is the best method by any meand. Just what fits my style.

[statsign 10]

I keep to stats - growth is just a percentage of capital

 

if system says setup wins > 85% of the time it will risk 30%

> 70% < 85% risk 20%

> 50% < 70% risk 10%

 

of course profit is all about exits

[AuctionMarket_Trader 10]

Also there are lots of post in here about Risk/Reward, but we all know that we do not determine reward market does.....All we can manage is Risk

[aversano 10]

Quite useless, indeed.

 

Be well.

 

Simulation is not useless...

[TheNegotiator 13]

An experience I had early on as a trader comes to mind on this topic. A trader who had been very successful while being backed by an arcade was now trading at the same firm where I worked but was now a client. I was quite privileged in this sense as I knew and socialised with some really good traders. Having done very well as a client, he had reached a plateau seemingly and actually I was trading bigger size than him(I was actually made to - it wasn't my choice!!). He asked me how I dealt with it. I can't remember exactly what I said as a young cocky(not too cocky!) trader, but it was something along the lines of I try not to look at size in any way other than mechanically whether it affects my ability to enter and exit the market. I trade the same way as I traded a 1 lot. This wasn't strictly true as it got to a point where I was pushed to do too much size and a couple of 'bad beat' trades affected me for a while. The client actually upped his size and carried on doing pretty well just with bigger size.

 

So my idea is to correctly size your trades is to have a thorough money management plan but also understand how you deal with the fluctuations psychologically. For me, they are symbiotic.

 

Sorry for the ramble!

 

TheNegotiator.

[AuctionMarket_Trader 10]

The correct formula for position sizing is as follow:

Units = 1% of account/Dollar market volatility

Dollar market volatility = ATR(20) x Dollar value per point

 

So lets say you have a 50k account:

 

Dollar market volatility = 10 (rounded for SPX) x $50 (ES point) = $500

Units = $500 (1% of 50k) / $500 (DMV) = 1 UNIT you should be trading on ES

[MightyMouse 12]

I start each day trading small size in CL and if I get a few winners, I will risk a great deal more on the next trade. To borrow a gambling term. I try to "parlay" my win to a bigger win. If I lose, I am still ahead for the day ( and pissed as all hell that I gave some back. I am human). To stay at the higher amounts, you are going to need to win at the higher amounts. In short, you need a lucky break. You really need to fight to get to higher levels and fight to stay there. We are trading traders who want your money as badly as we want theirs. One day you have to step up to the plate with more risk. And there is a good possibility that you are going to start losing a losing streak when you decide to step up.

 

Reading Market Wizards, you will see that most of those guys did have a lucky break. Chances are that had they not had that lucky break when they had it, they may never have made it into that book. One bond trader who is a scalper, his name slips my mind, tells his story of one day taking 100 contracts. Before that the most he had done was 50.According to the story he started 6 months earlier with 25k. Subsequently he traded as many as 2000 contacts in tbonds. The point is that he went from 50-100 and he won with 100 and never looked back. Had he lost, he might have become a clerk at the CBOT.

 

Personally I have gone from trading qm to trading cl, but have not been able to build enough yet to increase the starting size of my trades in CL.

 

I see this as the quickest way. I suppose you can do it more gradually, but that could take a very long time.

[SunnyJHarris 10]

No, this is the one I teach my students. It comes with the territory.

 

If that's the Ultimate-F that you charge $6500 for then this post is probably against the terms of this site.

[BlowFish 10]

No, this is the one I teach my students. It comes with the territory.

 

What territory is that?

 

I guess you are being deliberately obtuse? Let me spell it out for you, unless you are a sponsor it is frowned upon to use the forums to solicit business. Referencing people to your paid for product (whether you buy the product outright or it's part of some sort of 'education') is soliciting.

 

Vendors are made very welcome here if they contribute. 'Check out my site chock full of dubious products and services' is not contributing. Oh and before you take umbrage at 'dubious' I have always held a low regard for people that sell indicators and studies that are available in the public domain. Some of yours fall into that category.

[Madona789 10]

It sounds pretty easy and effective. I hope that will work great.

[Lavazza 10]

 

So my idea is to correctly size your trades is to have a thorough money management plan but also understand how you deal with the fluctuations psychologically. For me, they are symbiotic.

 

Sorry for the ramble!

 

TheNegotiator.

 

Absolutely agreed. Rules of MM are rules and changing or ignoring them can lead to high consequences.