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How do you get over the fear of increasing position size?

  1. I had a good trading day today. However my position size was $3k. I was told to go big on high probability trades. I have more than 50k in my account that is waiting to be used. This is not margin.
    However, I keep telling myself I will go bigger on the next trade.
    Would love to hear how others went through the process of increasing position size?
     
  2. by knowing what the hell your doing.
     
  3. Practice and more practice.
     
  4. The worst is going from one lot to two lot, or 100 shares to 200 shares as it is doubled. I'd put on the trade, went and made cup of coffee then returned, do that enough times you are wired from the coffee. I never got use to manual trading stresses, whether one lot or hundreds, was much tougher though when S&P 500 was $500 a point, so coming down to greatly watered down ES at a tenth of value, numbers didn't make me worse. Any time you are risking something you value, you going to be nervous. If doing shares, increase by 20 shares.

    Best you get to doing automation, now I don't check till end of the day.
     
  5. My advice:

    Your new trading zen:

    Reality:

    Your accountant's reaction when your remaining liquidity hits 0.2



    (R.I.P. Flounder Stephen Furst, Born: May 8, 1954, Died: June 16, 2017)
     
  6. Shouldn't you look at it as 50K in your account to fall back on when your current trade goes to shit, and you take a big loss?
     
  7. Going big is always potentially dangerous...no matter how sure you are of your "high probability" trade is, o_O

    You shouldn't size, in my opinion.

    You should instead always trade the same % of your account -- if you are Good, then that % will naturally grow on its own,
    You won't need to do no risky deviation that can leave your acct in a jeopardized state,

    If you are able to grow and manage your trading acct organically and healthily...all your trading fears will slowly dissipate,
     
  8. I guess this is a question of quantity vs quality in terms of growing your account. I feel going big on a few quality trades is better than taking a large number of small position sized trades.
     
  9. Who told you to go big on high probability, it's really not that complicated. You trade 1lot on a win, 1lot on a win, 1lot in a win, 2lots on a win, 4lots on a win, if you take a loss you start from the beginning again, if you break even you are etrade at that level. It's called an exponential curve, it's the reason you exist, assuming your not a creationist. The reason why you can't follow this beyond idiotically simple rule, cognitive dissonance.

    https://en.m.wikipedia.org/wiki/Cognitive_dissonance
     
  10. don't
     
  11. I kind of disagree with this idea. Unfortunately in trading there is a Murphy's law which states something along the lines of "The market will do what is least expected"
    In real life this means, the trades you have most confidence in will turn out to be duds and those you think are duds outperform. I've been trading for many moons and I can assure you of this, the markets leap all over the place and one moment 'x' is flavor of the week, thens it's 'y's turn.
    When you are selling a position thats when it begins a run up, when you buy it then runs down.
    One of the main reasons my trading makes bank for me is because like a few hardy souls on ET, we sit on positions for some days, weeks, months or sometimes years. Longer term gives more certainty.
    But initially when I place a trade with conviction, it goes against me, even after years of trading, getting my timing perfect just never seems to work out.
    So getting back to the crux of my suggestion, diversification is sometimes better over a larger number of positions than a small number of large positions.
     
  12. Well the advice he's following is from the Soros/Druckenmiller school. You might disagree with it, but it is as valid as any other.

    Probably best to track whether those high conviction trades are really high probability trades while trading normal size. If you find you really do have a nose for conviction trades then you will in time easily be able to size up because you'll have the confidence of knowing your own prior performance.
     
  13. %%
    Good points Quiet1. BUT you also have to remember + its a matter of pubic info/profit info; ''it takes courage to be a pig-Mr Drukenmiller'':D:D. NOT all have the courage or the good /long work/skill habits of Stanley Drukenmiller
    But that has to be balanced with the fact, he admitted he blew his account up also, about a 7 million /100% loss if i remember; trading to big, can work if you're young - maybe enough time to redo an account blow up LOL:D:D Another advantage he had == a boss that liked charts- considered a kook LOL

    Another advantage of blowing up an account when you 're young; you may have enough time to do it right?? Part of it depends on market; harder to blow up an account in cash market:caution::caution:Ring 4et, i would rather do fewer trades+ more research/ less comissions.
     
  14. Ahh yes, the Whole Foods approach! And they've just lowered many of their prices!
     
  15. The problem with any trade you take on is that PA can change in subtle ways after you entered. Sure, when you start noticing being solidly in the red, you can clearly see the difference. But in the beginning, it may look like any other pullback though just continuing, invalidating your previous entry.

    If this happens with a "high probability entry" and you loaded up on it, small movements may be devastating. Suddenly you've overtraded and need to save your position or take a huge loss, but can be tough to find a good exit. This can even turn a positive expectancy system into a loser!

    Traders shouldn't jeapordize their stake, but always keep some powder dry in order to find more opportunities. There are limits to how small will be meaningful to trade, and also how big the largest positions should be. Deciding this is an important plan of the trading plan and risk management.
     
  16. Reading all the comments it becomes very clear the OP doesn't understand the basic concepts. They want to use a logarithmic curve to profits, the sure fire way to implode. A high probability trade does not mean increasing size, it means preserving capital and reducing effort for the same return, an exponential curve. It's always amazing how people extrapolate what they want to hear, the pot of gold at the end of the rainbow. Anyone can make something look complex, it takes a true genius to make it look simple.
     
  17. @birzos assuming you are increasing size along these lines, does it alter the expectancy of your system ? Or is the expectancy calculated the same way ? Thanks

    After additional thought...I guess the larger lots (trades) are just included like any other since expectancy is measuring the entire system..I think. please add any comments along these lines.
     
  18. Totally agree.
    As well, trading is something which morphs as you go along, like murcury in the palm of your hand.
    Currently I'm holding 19 different positions on one trading account, 13 positions on another account and 3 positions on a 3rd trading account. A month ago I didn't know this outcome, it evolves as each day goes by, I see opportuniy windows opening and closing daily and take appropriate action always attempting to engage near 100% of my accounts to be working within the limits of what the market allows at the time. However as birzos so wisely says, its about PRESERVING CAPITAL.
    A trader needs to be in to win - there is no material profit for an audience but, guard your positions like an eagle with its chicks. A single large position is riskier than several positions having the same $ outlay. If the eagle has only one chick and loses it then it's in trouble, but if she has several chicks and loses one, not so bad. Insurance always costs money, just like holding numerous positions, more effort required but it pays off in high risk endevours such as trading.
    As for fear, you need balls to trade, this game is not for wussies, but needs to be done with intelligence, not recklessness
     
  19. but how do you know the quality of a trade beforehand ?
     
  20. Going big on a let's say 90% probability trade and making 10k is better than making $100 on 100 lower probability trades. Because the more often you enter and exit the market the more risk you take on in terms of slippage, execution errors etc.
    The more selective the better.
     
  21. First off, learn some maths, that would be a good start.
     
  22. When I originally began, I could only margin 80%.

    Now? My positions reach into the tens and hundreds of millions. Seriously, I say it everywhere. Read SEC 15c3-1
     
  23. What instruments do you trade? And what is your average yearly return? I don't use margin.
     
  24. Appears I got your gender @rin4et wrong in my post. Sorry, did not check profile beforehand.
     
  25. The methodology is the same regardless, it is about confidence, many books have been written about it. You take a working system, reduce the size to minimal, and increase when you are winning, it keeps losses small.

    The subconscious mind is extremely powerful, it can be processing information without you realising it, finances, relationship, family, food, health. Any mistake on your part will turn in to a loss.

    So to avoid that you dip your toe in the water, most dive in head first and lose their shirt, the power of money. Over the long term what does it do, it makes you more profitable. You give less to the markets when flat and keep more for yourself when on a roll.
     
  26. Exactly, although I start with single small positions, they may evolve in to larger single positions due to previous wins, or in to smaller multiple instrument positions. I use the first on low timeframe and the latter on longer timeframes, the net is the same. People don't seem to understand the combination of the markets and your personal confidence/psychology/strategy determine a winning trade, they rarely all intersect.
     
  27. That's alright. No need to apologize.
     
  28. I think a reliable charting is the key. 90 to 95% of accuracy. Hard to come by.
    Some people may go for large size with 60 to 70 % reliability with profits, but that would be a constant torture of juggling with money management/risk control and a roller coaster of psychological adjustment.
     

  29. I hope I won't offend you by mentioning that for me, the exact opposite is true: I'd far rather make a level-ish average of $100 over each of 100 small trades than do one big trade (a "90%-probability trade") that nets $10k.

    I think I have three main reasons for feeling this way (they might turn out to overlap to some extent: that has a habit of happening whenever I say "I have three main reasons"!) ...

    First, I'm not convinced that I really believe in "90%-probability trades" - not within my own normal trading parameters, anyway: I recognise, of course, that there can easily be trades with a 90% win-rate, but in my own mind (and I'm saying this after a lot of experience) these tend to be something of an artificial construct created primarily to illustrate that such a thing is possible, rather than regularly repeatable "real world trades" which constitute part of a method with a genuine, proven, positive expectancy.

    Secondly, I'm a great believer in statistical significance and the reality that "there's safety in numbers" or "the principle of large numbers" or whatever else one wants to call it: the closer your win-rate is to 50% (on either side of it), the smaller is the number of trades one needs to observe to calculate a safe position-size with a high degree of confidence that one is basing it on genuine statistical significance. On some level, I don't "trust" trades with "90% confidence". I don't mean just "90% confidence in having the overall direction right": obviously an entry method is not a trading method - there's far more to it than that (and I understand that you know this already and meant far more than just that, too).

    Thirdly, I feel very much safer and more confident trading "comparatively little and comparatively often" and have really found it both far easier and far more realistic, overall, to make a living that way than with other methods I've tried. Three consecutive accidents with the kind of position-sizing you mentioned in your original post would be an extraordinary disaster for me, giving me a far bigger drawdown than I've had for many years. (And who hasn't, at some point, had three consecutive accidents, even with "very confident trades"?)

    I'll be honest - again, very much hoping that I don't offend you - and mention that I saw your original post not long after you made it, was seriously perplexed by it, and decided not to reply only because I suspected that I'd misunderstood what you were saying: it didn't seem possible or reasonable for someone with a substantial account to be risking 6% of that account on a single position. (The way the thread's gone, I'm now more confident that you did indeed mean that, and I wish I'd replied earlier!).

    I appreciate that everyone's concepts of risk management and degrees of risk aversion are different, and that we don't all have to agree all the time (and indeed that it would be boring if we did!), but honestly, I'm with the person who posted on the previous page, responding very succinctly to your observation that you want to increase your position-size still further, by saying simply "Don't". [​IMG] (He probably said in a word more or less what I'm saying in 13 paragraphs ... but that happens, too.)



    I don't really agree with this. I can "kind of agree, up to a point", but I strongly suspect that you've gone well beyond that point in terms of practical realities.

    Trading frequency is relevant, too - not just win-rate.

    Very high win-rates tend to preceed accidents.

    I understand the attraction of high win-rates (which of course arise from "being ultra-selective"), but I strongly prefer the perspective that what matters isn't "being right as often as possible" but simply "steadily gaining more from the totals of winning trades than you lose from the totals of losers".

    I wish you nothing but well with your 90%-confidence trades, but please excuse my mentioning that I'd be distinctly uncomfortable with them, myself, and (call me conservative or even a skepchick) I strongly suspect that I'd probably assess them at a lower figure, too.



    By weight of numbers, and by experience, and by calculating my position-sizing far, far more conservatively than I suspect you do, on the basis of far, far bigger sample-sizes than I'm ever going to manage to assemble with very high win-rates (and their concommitantly low trading frequencies). I avoid fear by having great confidence - statistical confidence: every time I enter a trade, I can't tell you with any great confidence whether it will be a winner or a loser, but I can tell you with a really high degree of confidence what the overall outcome of my next 300 trades will be. And that's what matters to me. That confidence, for me, is another name for what you referred to in your title question as "lack of fear" or "getting over the fear". So there you go: at least I've answered your question directly, even if the answer was just my own perspective.
     
  30. You sound very like what Nodoji would say, in a good sense.
    Your system is probably very discretionary.
     
  31. @Xela Thank you for your detailed response. I haven't read your post thoroughly yet. But regardless whether we agree or not I appreciate you taking the time to respond in great detail!
     
  32. Soooooo true.
    (Always good to hear what one already knows... but might lose sight of being cocky.)
    thnx.
    gets a post-em note.
     
  33. Xela said:
    Very high win-rates tend to preceed accidents.

    Warren would beg to differ
     
  34. Warren Buffet doesn't daytrade.
     

  35. I know fortunes can change dramatically, but I have difficulty seeing him as a beggar ... (anyway, that's arguably "investing", not "trading" and perhaps a slightly different context?).

    Some of those independent sites where "trading signals" can be "subscribed to" even display a prominent warning next to the highest-win-rate services on offer, to the effect that very high win-rates tend to preceed accidents ... because in an everyday trading context, they do.
     
  36. Xela ain't Warren!
    Warren's an investor, and Xela's a trader.
     
  37. Ok ok ok.
    Trading is risky, keep position size small.
    Investing is safer, you can substantially build size with less risk.
    Everyone happy? :)
     
  38. I think you should just accept where you are in your trading, right here and now. I've read (and responded to) your other posts. Your'e not going to get this fast. I'm guessing you are smart, and probably work in some kind of analytical capacity where making mistakes is not acceptable. Here you're going to make a lot of them. The point is to make them in a way that doesn't hurt too badly. But it's going to hurt. There's just no way around it. When you come out the other side is when you get to understand why you had to endure the struggle, and only then. There's very little in the way that most of us grow up that prepares us to lose and win in this way. If you're new and you are breaking even, you're winning.
     
  39. My favorite trading saying from Market Wizards--"Stop thinking that you know something about the market". I use this thought just about every day, because my mind wants to tell me that it knows what is going to happen. It's all just a tendency that can vanish quickly. I see a lot of assumptions being made. If you knew that the market we're going to behave a certain way, then you could have your foot to the floor all the time. But that situation never ever exists. Examine your beliefs about things first. The rest will take care of itself.
     
  40. Position size has to do with what the market is telling me. It has to do with time of day (liquidity), what the technical position of the market is(hanging off a cliff, in balance, or something in between), whether it's near big round numbers, if it's reacting to news or just technically driven, and especially is there a reversal here where someone has been trapped. I really don't see how one can have the same position size all the time. If I see a market that has been spooked somehow, I'm going to press automatically. Otherwise I tend to be cautious.
     
  41. %%
    CswiM;
    That sounds like a paraphrase of PTJ, one of the most funny, most true i ever read .He told lack Schwager, the most common misconception people have is about Wall Street is= they ''know some thing'' -----Paul Tudor Jones LOL-LOL:D:cool: As far a high probability trades/investments ; older Turtles made most of those millions on low probability trades/BIG Trends,+ big leverage.

    Since they {turtles} made so many millions that way [BIG leverage+ big TRENDS];
    like to study cash markets[ zero leverage]+ BIG TRENDS:caution::caution::cool::cool:
     
  42. Yes.

    In real life, traders and gamblers have to have an edge and do volume; lots and lots of trades and bets.

    If you daytrade and earn a penny a share profit, how much volume must you do? How about earning two pennies a share?

    Just how big an edge do people think can have manually daytrading, if they have one at all?
    Of course the algos are doing volume.

    In theory, and once in a very blue moon practice, 90 percent winning big edge bets can occur. However, I do not know of successful day traders or gamblers who only wait and wait and punch big.

    I do know of a few successful investors and speculators like Buffett and Soros who are patient, skilled and sometimes wait and wait.
    ____

    Story:

    I knew a huge Nasdaq scalper who made millions.

    One day he received a call shortly after 9/11 that a plane had gone down near.. I forget.. big Eastern city. This information was not on his news feed.

    Well.. he instantly shorted the SPY for the largest size he had ever traded and nervously waited for 15 minutes until the news hit. He won big.

    But this was his only ever "special" big trade. Everything else was edge plus volume, volume, volume.
     

  43. WARNING: The fellow in my story who made millions scalping years ago no longer scalps because his edge went away.

    Things change. Sometimes the only winning move is not to play.

    Or as Charlie Munger says:

    "Tell me where I am going to die so I will not go there."
     
  44. Yeah, the W.O.P.R. needs to tell that to Trump and Kim Jong-un.
     
  45. %%
    WEll, 777, like the top man at CME or one of those top Chicago exchanges said ''innovation deserves more than 15 minutes'':D:cool::thumbsup: WARNING ;trading is not gambling@ all; done both. We used to gamble/ jerk .25 [quarters] out of of pool halls, as kids,; the fact that some commercial traders use .25 levels also has nothing to do with pool halls.Thanks
     
  46. With practice working on demo account and studying market briefly.
     
  47. IMHO, if not sure or cannot pull the trigger, use Kelly criterion as a guide.

    For example your win probability is 90% (your prior posts) and your win payoff is 1:1 (your short option spreads are worthless at expiry), assuming your loss payoff is also 1:1, i.e., you manage your losing trade carefully. Then your Kelly is .28. So your bet size of $3 K is ~2/10 Kelly. Actually not too conservative considering you may not be able to manage your loser to 1:1.

    If you are confident of your win & loss rate, then go to 1/2 Kelly or $7 K, which I won't recommend as you are relatively new to options, like me.

    Good luck.
     
  48. I don't trade options. I think you must have read someone else's post. And I don't know how you got the idea that my win payoff is 1:1
     
  49. My apology. Still you should try Kelly. It will force you to figure out your win expectancy.
     
  50. Lol, if you have 90% chance of winning 1 and 10% chance of losing 1, the optimal fraction to bet aka Kelly is 80%, not 28%.

     
  51. I stand corrected. You are right, with a win probability of .9 and a win/loss of 1:1 it should be .8. My bad!

    Such a high Kelly is like printing money!

    Regards,
     
  52. Daily meditation helps me get over my fears.
     

  53. All my trades are with-trend but I accept I have no way of knowing which will turn out to be extended with high % price change. So when entering any such trade I set another equally sized ahead of price. The aim is to keep adding trades ad infinitum until the trend severely weakens. All stop-losses are pushed ahead at the same time each new trade opens.

    The downside is that in trends that quickly peter out and fail, you don't get the quick small wins. However, on the trends that keep going, profits grow parabolically. As far as risk is concerned, the tactic loses some unrealised profit from every trade except the final addition: that one's the loser, the one before breaks even and all the others make a cumulative profit. As opposed to simply opening a larger initial trade, the initial risk to capital is never increased under any circumstances.
     
  54. Excellent post.
     
  55. Where does this endless supply of risk capital come from?
     
  56. If you put all your eggs in one basket you are open to any of the market's whims. The lure is quick hindsight profits, but over time you will encounter why you should diversify, thus dampening potential profits over time. So for most there's no choice and just a question how to manage money properly.
     

  57. Free margin increases as unrealised gain increases. In theory this is endless but in reality all trends stall and weaken, that's when the profit comes out.
     
  58. I can put some round sample figures in this to make it more plain.

    Suppose you buy into an uptrend with £1 per point at 10,000 and put in a 100pt trailing stop-loss. Initial risk is £100. If price goes to 10,500 and then falls back to 10,400 the SL is triggered and you gain 400pts, for £400.

    To increase this return, you could go in at say £2/pt, but then your initial risk would be doubled to £200. I'm assuming you have to set your initial SL at 9,900 based on the TA.

    My suggestion is to set a new buy at 10,100 as soon as the initial position is opened. Give this also a 100pt SL. When the 10,100 long is triggered, move the SL on the initial trade to b/e, 10,000. Set a new buy order at 10,200, also with a 100pt SL. And keep doing this: add a new trade every 100pts and move all the SL's of the earlier trades up 100pts when it triggers.

    Now, when price has risen to 10,500, you will have 6 parallel trades open. If price falls back to 10,400, all the SL's will be triggered, and gain will be £900 instead of £400, at no additional risk to your capital. This is an improvement of 125% over the standard gain from a single long in the same scenario. Of course, as you add further pyramid trades, the % improvement accelerates. As a demonstration, at the (admittedly unlikely) total of 20 trades, a single long would gain £1,800: the pyramid series would deliver £17,000!
     
  59. Interesting. But how would it compare to not a single position at 10k, but a full load based on your risk tolerance? Aren't you giving up a lot right off, lowering profit overall? I mean, sometimes I'll scale as it goes my way, but mostly I want a full boat on any breakout. It's either going to work or it isn't.
     

  60. Yes, this tactic is a trade-off. But investing £10k at the very outset, assuming the same set-up and the 100pt SL, incurs a much higher risk to capital. My approach instead sacrifices unrealised gains for the potential of extraordinary profits - but the initial capital risk does not increase above £100.
     
  61. Why fear ? Because subconscious mind is telling you that it is dangerous, risky, fearful, scary.
    And the subconscious mind could be creating hovoc by giving uss
    OCD obsessive compulsive disorder where we think about fear again and again at subconsioucs level.

    We have to overcome fear
    by conscious thinking
    by visualisation
    by using psycho cybernectics
    by centering our mind using various techniques

    and we have to do is repeatedly, frequently till the attitude of confidence becomes a habit.
     
  62. %%
    And dont forget , until he has some idea/plan of what he /anyone is dong, he rightly should be afraid:thumbsup::caution:.
     
  63. No one will ever be able to completely overcome their fear. To be afraid - is normal, an absence of fear - now that's abnormal.
     
  64. In an environment of uncertainty, you're risking much more all at once. How can that ever be a good thing? Running fast and confidently in the dark might get you there sooner if you're lucky, but it's safer to walk and feel your way through. You're less likely to end up with a limp. :D