I wonder if any seasoned traders will share their experience, specifically process of increasing position size. If a trader has been trading 3-6 contracts, ES, YM, NQ, GC - and had done well so far this year. Starting next year wants to focus on increasing the size of the position...what would you recommend? was wondering how people have approached this.
add 1 contrac everytime you`ll make 3x times the overnight marging value for this contract.that`s how the compouding works,well,in a conservative way.
Use your profits to determine your position size increase. For example, if you have been trading 1 contract per 10k and your profits this year is 20k...your position size "increase" should be no more than 2 contracts more. Another example, if you have been trading 1 contract per 50k and your profits this year is 40k...you can not add another contract to your position size until you make in profits another 10k. Further, your profits should still be available in your trading account for use with the position size increase to prevent abusing your margin. Markets change and today's profits is not a guarantee you will be profitable tomorrow. Its a very simple process...nothing fancy even though there's lots of mathematical equations, money management rules or whatever for determining increasing or decreasing position size regardless if they are useful or not. Just as important, whatever you use to determine when to increase position size and by how much...don't forget to "decrease" your position size via the same rules when trading isn't going so well.
I think increasing position size is mostly related with the capital present in a trader's account. The more his account size grows big, the more high lot he can use.
=============== Mr Super W; WELL plenty of traders blow UP accounts; hardly ever because of trading one share[not one contract, one share]Younger we were, more the insurance companys charge us for auto insurance,, cause we did NOT respect RISK Lets see a silver contract [one contract] is about $250,ooo[with silver is at $50/oz] .So how many houses should one trade @ a TIME,LOL Respect risk ; or blow up accounts= its that simple. How long do you want to be in business???????.My comments are business related, for max thrills trade all the contracts you can stand[sarcasm, don't try this at home]
I approach it using the Kelly criterion and a 60/40 edge. Maximum position size is 5.71% of account value. Remember a monkey has a 50/50 edge. This percentage maximizes gains at this edge.
Welcome. One suggestion: If you practice Kelly, try not to use full Kelly to maximize your gain because unless you have unlimited capital, your chance of ruin could be unacceptably high. Most experts on ET recommended using < 1/2 Kelly, perhaps 1/4 to start. Best wishes.