If you traded 25 contracts with $250,000, what will you do if you sustain a $50,000 start trade drawdown? The question should be asked in the context of fixed risk versus fixed fractional percentage. When applying either method of position sizing, careful attention must be paid to the drawdowns when the trading approach is simulated in a statistical manner. When someone tells you that they will trade 1 contract for every $X of equity, that value may be viable for the strategy they are trading, but might cause you to blow out with your own approach. Be very careful with this. RoughTrader
Here's an idea. You mention getting chopped up a bit. Certainly everyone's trading plan has flaws or else we'd all be billionaires. Would you be more profitable without incurring substantially bigger drawdowns if you scaled in? To me the virtue of having a decent stake is the latitude of not having to go all in. I agree with the guys who say 1 ES per 10k is about right. That makes you a "natural" 25 lot trader. Perhaps go in 10-5-10. Not always but sometimes. I believe strongly that the ability to manage position sizing vis a vis adding and scaling out is as important as directional prowess. Just a suggestion.
At least for me, the question is answered by trading style. My system gives me two and four point pops. I enter with a full position at the get go and wait for at least two. On the second trade of the day, I look for 4 points (that is what my system provides in the Russell Market). Because I do not like to give back profits from my first trade, I will often enter smaller here and add as I get "breathing room". Smaller size on entry means I can stand more heat before leaving the position, and once I do have a point or more in my favor, I will often see a pullback or retrace suitable for adding. I tend to size 1 contract per 10k early in the year. If the previous trade was a money maker I add at least 1 contract to my entry. If it was a loser I cut my size in half. Several consecutive losers means I have to sit out the day. Hope this helps Steve
Pabst - that is a great suggestion and one that I have struggled with to be honest. For me, in order to scale in, (example going long) I would keep buying at higher prices. I do not believe in averaging down. Knowing that, would you still scale in? And if so, in what intervals? Every tick, every 2 ticks, every point?? Use the ES for any examples. Thanks!
Holey-Moley. I've got 500 dollar margins and at times, I will go all in with max margin and usually average about 40 - 60% of margin available... and no, my equity swings are not that dramatic. But it does throw a Steve T-Var's type consistency out the window.
intraday--- as little as possible--if the trade is wrong, the trade is wrong, and vice versa. this has nothing to do with margin. interday--- exchange minimums. surfer
Your only looking at this from one side of the street. The other side of the street is the method itself...a strategy that may be very aggressive via the type of trades that are being executed. The opposite is just as true... You can be very aggressive or not conservative in your money management department but use a strategy that's super conservative. I guess that ties into what RoughTrader said... Simply, once you can determine what type of money management fits your particular type of strategy that gets you into trades and out of trades... You've found that key balance. P.S. I trade volatility and it goes very well with my ultra super conservative 1 contract per 10k. Mark