I couldn't agree more with these statements. Personally I would make money with a couple of trades and give it all back and then some. I think for a newbie stopping while you're up is important if you have a tendency to give it back. Just make sure to limit your downside as well, ie. Daily Stop of -$300 or whatever you're comfortable with for a daily loss. I have mine set for 1/2 my average daily profit. Some trading rule suggestions for newbies: - Stop trading once profitable for the day. or - Once profitable, quit for the day after your next loss. or - Once profitable, stop for the day if you give back 50% of your profits. This insures that you don't feel like a jerk for giving it all back.
Yes, my trading pattern (on average) for the past month has been up for the morning. Some days, I keep slowly building it up during the day scalping the SPY for 10-15 cents. However, the past week (and it's still going on) the afternoon has taken away all my gains from the morning. Someone posted and said that I'm mentally trading out of my comfort zone when I trade 800 shares. Thinking back on that, I believe it's true because I tend to get shaken out of the market and tend to watch each tick too closely. So far today, I shorted the 500 SPY at 10:42am and got shaken out near 10:50am. This time, no money made in the morning. DNAJ65000
Just probability: trading too often or two big is the same thing as for risk. In statistics there are two kind of risks: alpha and beta. Translating into trading alpha is the true risk (risk of loss), beta is the risk of opportunity. The two are not independant so wanting to decrease one (beta by taking more big positions) without increasing the other is nearly impossible task . Institutional traders which trade with OPM (Others People Money ) and don't have any legal obligation of results will privilege low BETA RISK so that alpha risk is high: they don't care since alpha risk is supported by their clients not by them . Whereas a trader that trades for himself should care more to lower the ALPHA RISK than the beta risk because if he doesn't care about alpha risk he can find himself into a survival game one day. That's why perhaps one of the reason why institutional traders that try to trade for themselves after they lost their job have the reputation of being losers : because they have never been accustomed with alpha risk .
Harry sounds wise to me. DNA: this swinging for the fences mentality does you no good. You trade 'size' by being comfortable. You get comfortable by building up your trading account through a series of successful trades and sound discipline. What you need is a proper sizing plan and risk management regime. It's just as important as your technical skills. And most often ignored and overlooked. Research all of the threads on the subject.
I have found that increasing size almost always requires taking a defensive stance. By that I mean that it is rarely correct to go ALL out at once if you have not taking out some extra risk in doing the size, _if_you_have_never_done_size_before_ For example, if you want to do 10000 GE short, and you have never done more than say 5000 or 7000, it is perhaps wiser to do the size but hedge it with some ES long. This way, you have done "size," but have taken a defensive posture at the same time. There are other ways to do this... In addition, I have found that outside of the psychological aspects of doing size, the only difference is liquidity issues on the way in, and liquidity issues on the way out. Take it slow and find out for your self. nitro
how would you know, you've never done SIZE in your life Just when do you plan on getting started HA! and remember, ABOVE ALL YOU GOTTA *GET STARTED*!! HEH
1) During the 1980's I supported myself by betting on thoroughbred horse races (at the NYRA tracks ---- Aqueduct, Belmont and Saratoga). One of the most interesting things about the racetrack environment is that you get to meet some fascinating characters. A man who became one of my closest cronies was a brilliant handicapper, but he suffered from one tremendous problem: he couldn't control himself at the betting windows. If he got ahead during the first few races (which happened often enough because of his great skill at picking horses), Bobby would throw caution to the wind, and start betting his entire bankroll on each individual race, trying for a giant killing. Of course, virtually every day, Bobby ended up losing everything, including his original stake, and was reduced to begging me to loan him the cash to play the last few races on the card. While he was certainly talented and perceptive enough to earn a decent living betting the horses, Bobby's total lack of discipline and self-control consigned him to the ranks of the big losers in the game. 2) The closer I grew to Bobby, the more I realized what an intense self-destructive streak he had. Looking back and substituting the racetrack for trading, Bobby is a perfect example of Ed Seykoya's dictum that people basically get what they want to get out of trading. Bobby wanted to lose for various semi-conscious and subconscious reasons, and despite his brilliance, he conducted himself in such a way as to all but insure that that would be the eventual outcome. So I would ask you, DNA, to look inside yourself with all the honesty and clarity you can muster, and explore what reasons and fears you might have that prevent you from operating in your own best self-interest. Do you really want to win at this game, or are there submerged issues you're not facing up to that are negatively affecting your trading? Because if you were deliberately trying to lose, drastically increasing your size out of the blue is as close to a surefire way to achieve that as there is. 3) Bobby would always justify his actions by saying that once he got ahead he was *playing* with *their money* or *the house's (the track's) money*. Of course, that is the attitude of either a rank amateur and/or someone destined to be a big loser. A professional trader and a winner knows, deep in his bones, that his profits are HIS and HIS ALONE, the fruits of his labor, and that it is his right and his responsibility to protect, husband, maintain and extend them. Bobby's mentality represents the classic gambler's pathology of giving it all back simply for the sake of heightened action and thrills. It's your right to do that if that's your bag, but then you can't turn around and actually complain that you are losing money in the process! 4) By way of analogy: The gambler's all-or-nothing mentality is like a major-league hitter who tries for a home run at every at bat. The result, of course, is an occasional long ball, a great many strike outs, and eventual demotion to the minor leagues! The best batters simply strive to make every at-bat the most productive one they can ------ if Pedro Martinez throws them wicked curves on the corners, they do they best they can, by striving to making contact and trying to scratch out a few singles, rather than accepting an all-but-certain strikeout. And yet if the occasion should arise and Pitcher X hangs a slider or grooves a fastball, they're ready to pounce and hit it out of the park. A good batter takes whatever he can from a pitcher, nothing more and nothing less, and by near perfect analogy, a good trader garners just what the market makes available to him ---- nothing more and nothing less. Sometimes it's a homer, other times a single, still other times a strikeout. But it's the market and only the market that determines how well you can possibly do on any trade, and once you respect the market itself as the ultimate and indeed the only arbiter of such matters, that it completely supercedes your own ego or desires (let alone the happenstance of the current condition of your bankroll or the course of this particular trading day!), then the path to consistent profits lies open to you. 5) Because you tend to be successful trading early in the day, I'm assuming you have a method, a system, a set-up (or series of them), or an approach that gives you a significant edge. If so, then it is imperative that you come to understand that your one and only task as a trader is to exercise that edge, over and over and over, whenever it appears and only when it appears. If a trade is a good trade by whatever means your method determines is a good trade, then it is a good trade and must be taken. Period. Whether you are up or down for the day, for the year, or for all eternity is absolutely irrelevant. If it's not a good trade (again as determined by your system) then it's not to be taken. Period. Whether you are up or down for the day, or for whatever period is absolutely irrelevant. You have a percentage edge and it is for you to exercise that edge and just that edge every legitimate chance you get. To paraphrase a best-selling book, take good trades, and the profits will come. Take bad trades, and the losses will come. Turn off that P/L indicator, banish all thoughts of how far ahead/behind your are and simply devote every ounce of your energy to watching for the good set-ups and then executing them with as much precision, accuracy and consistency as you can. The profits will then take care of themselves. 6) Understand that the trading day ---- regular trading hours --- is just an arbitrary division due to the fact that traders have to have time to rest and recuperate. In reality, trading is an probabilistic occupation that takes place over a long stretch of time ---- often running into years ---- and how well you do or don't do on any tiny segment of that period is virtually meaningless. To use a batting analogy again, it's grossly unreasonable to expect a .350 hitter to get a hit or two in each and every ball game. Sometimes he goes 0 for 5, other times 4 for 4. But on balance, the good hitter has more than his share of successes. Judge your trading performance over an extended series of plays (such as a baseball season) and not by how you do over each and every miniscule and arbitrary stretch of time. 7) Finally, as other posters have noted, you are almost certainly putting enormous stress on yourself by drastically increasing your size smack dab in the middle of trading. Suddenly every tick looms dramatically large, the whole process is intensified several fold, and you're almost certain to start trading in a very different and likely much poorer manner than that to which you are accustomed. Rather than yo-yo around with absurdly different and psychologically debilitating position sizings, you should slowly and incrementally increase your size as your capital grows to maintain an maximum equivalent percentage risk per trade. If you now risk, for instance, a maximum of $100/trade and then you suddenly up that to $500/trade you're setting yourself up for an almost sure fall. Eventually you're going to take a huge loss or, worse still, a series of losses. Instead, risk say $120/trade. The psychological difference is all but non-existent, yet you rightfully increase your potential reward in due and modest proportion to your increasing capital reserves.
There's lots of stuff out there on POSITION SIZING that will explain why your smaller positions tend to do the trick!