[Dinerotrader]

I was wondering if any would be willing to share how they went through the process of increasing their regularly traded position size. I realize it can depend on numerous factors so there isn't really a right way to do it so I thought hearing from other's experiences would help me develop a method.

I'd like to incease my size as quickly as possible without letting my risk get out of control. It is very easy to look at your past results and just start multiplying by x number of contracts thinking you could have made x amount more with larger lots but this doesn't take into account all that goes into it.

I threw this chart together to give me something to think through.

[BlowFish]

TradersCALM - risk of ruin menu All you need is here. One of the reason that even successful traders blow up is assuming too much risk. Personally I would consider reducing RoR over time. You might want to google monte carlo simulation & risk in financial markets (or similar( if you really want maximum bang for your buck. I would try to be as quantitative as possible and personally (again) I would focus on risk. Simple version, the more you cane it the greater your risk of blowing up.

[bootstrap]

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

[DugDug]

Theoretically - your risk reward should not change for each trade regardless if it 1, 10 or 100 contracts.
The process of actually increasing contracts is different.....
While ideally this can be documented and ordered - eg; allocate a certain number of contracts to varying equity levels of the account, trade to be consistently profitable and then increase size after 4 weeks, reduce/increase size when certain equity levels are reached.

Personally when I first started trading it was based on comfort levels, starting at 1-5 option contracts, raised to 20-50, it still remember doing the first 100, then the first 1000, and finally in lots of 1000. There was no process, just when I felt comfortable.... but primarily once I was consistently profitable.
I would say that its important that once you step up, or down a level, stay there for a period, otherwise you risk the possibility of having some losses while trading larger, scaling back becoming profitable again, and then scaling up and loosing again. This can affect the absolute dollar amounts massively. Think through how to cope with this possibility, as you dont want to step up a level and then be spooked into suddenly being profitable only with smaller amounts.
Currently in retraining myself (in more intense intraday trading), I will stick to 1 contract until I am consistently profitable with a proper basis, then it will be a matter of upping contracts based on equity actually committed and comfort.

I used to use this simple formulae to increase / decrease your position:

Percentage of Winners X Average Win / Average Loss

Regards

[rs1]

One tried and trusted way of doing this is to simply bet a constant percentage of your closed account equity on each trade. As your account increases, your bet size increases (in terms of absolute amount at risk, but not in terms of percentage of account risked). And as your account goes through a drawdown, your bet size decreases accordingly.

This probably works better for a larger account as you can finesse the position sizing a bit more, but the principle is sound and removes a fair amount of emotion from the equation. Of course, you have to choose a percentage of account to risk that you are comfortable with. And that may be the most important factor.

[macdfx]

Your position size should be proportional to your risk and your account size. This means that your trade size should also be able to meet and cover any margin requirements if you are caught in a limit move as well.

One thing is that most traders are quick to increase position size without considering the potential consequences of doing so. I'd rather learn to trade a given setup and product successfully with say, only 3 cars, than expose myself to undue risk with a larger position.

For example, it takes only a 35 cent move on CL to earn $1000 with 3 cars (and that should cover commission as well). I think with a little study and prep you can learn to find and trade a setup that can get you that kind of move day-in and day-out.

Rinse and repeat. And sleep well at night too. (And be sure to use stops every time you trade).

[brownsfan019]

Originally Posted by macdfx »

Your position size should be proportional to your risk and your account size. This means that your trade size should also be able to meet and cover any margin requirements if you are caught in a limit move as well.

One thing is that most traders are quick to increase position size without considering the potential consequences of doing so. I'd rather learn to trade a given setup and product successfully with say, only 3 cars, than expose myself to undue risk with a larger position.

For example, it takes only a 35 cent move on CL to earn $1000 with 3 cars (and that should cover commission as well). I think with a little study and prep you can learn to find and trade a setup that can get you that kind of move day-in and day-out.

Rinse and repeat. And sleep well at night too. (And be sure to use stops every time you trade).

Sounds so easy, doesn't it?

Just trade 3 contracts and go for 35 ticks and off you go!

Better yet - trade 50 and only need to go for 5 or 10 ticks.