Sure.Even more,in automated paper trading and backtesting.For the first time you`ll see that a few things only you can survive with.Next step would be to stcik with those things religiously.
Everyone has there own internal levers and switches that push them and pull them in all directions and with various levels of impulse and control. It sounds like you have a threshold fear level, in dollar amounts, that upon being reached your rational thinking takes a back seat and the fear is in control. When the emotions are in motion, the rational is not. Nothing bad, everyone reacts like this, (except for some sociopaths and other personality disorders). For myself I found an internal lever that counter-balances this, a complete faith in mathematics, specifically probability, statistics and combinatorics. Once I have adequately tested a trading methodology with a low dollar live account, for several hundred trades, I know what the outcome of my trading will be and the variance in results that are within the norm. I can then increase the dollar amount of the trades without the emotional response since I know the parameters and variance that will occur with the next several hundred trades. Statistics uses the term "confidence level", and the double meaning of that term, to both a trader's fear, and the maths of their method, applies. Of course should there be a series of results that lie outside those parameters then I immediately stop trading. It means something unknown has occurred and it needs to be defined. The problem with this method; it takes a significant sample size of a minimum of 300 trades. Most people do not have the patience for this, they believe that a computerized back-test will be sufficient. And should I change one single parameter, then the testing starts all over again for another 300 trades trades. My G_d, that could take months! Yes, it does. Now assuming that you already have a proven trading method, with a statistically proven edge, and good money management, then it is yourself that becomes the subject matter. If it is your reactions, and not the method that needs to be tested, then I would suggest a live low dollar account. Just enough to get a bit of pupil dilation when price moves against you, but not so large as to make you nauseous. Gradually increasing over time as your psychological response adapts to reality, rather than a perceived future of suffering. Buddhists make good traders, they just have no use for money (hard to work in a Buddhist joke). If you have advanced your trading skills to that level, you will eventually be fine and make significant profit in the long term. One caveat being if you have a disorder or phobia that requires professional psychological assistance. If that is the case, then get the help, a simple matter of investing money in yourself for a long term profit. Just as you would spend money on a new computer for trading, spend money on a good professional to remove an irrational fear. There is also the famous quote from boxer Mike Tyson, “Everyone has a plan until they get punched in the face”. For a trader, taking losses (getting punched in the face) is part of what happens on a daily basis, you need to get used to taking a loss on a single trade and then to simply move forward with the next 10. Again, the mathematical certainty that your wins will overwhelm your losses, makes the momentary sting of the loss bearable and not a reason to “throw in the towel” (keeping the pugilistic references consistent). Van Tharp has written extensively on this topic, and certainly with more rigor, perhaps a trip to the library. I see that the world famous Xela is on this forum and she might be able to provide further insights.
rin4et: "I am a discretionary trader . . ." discretion: 'the freedom to decide what should be done in a particular situation.' rin4et, whatever you mean by 'strategy' is useless so far as your trading goes. discretionary: 'not fixed by rules' — 'THERE'S NO RULES ?' — 'ARE YOU FUGGING CRAZY ???' — 'THERE'S NO RULES ? ? ?' rin4et: "But I want to stick to my strategy." — 'YOU HAVEN'T GOT ONE', except — "RUN AWAY" now here's something usefull: "With day trading there is no time to think." so watcha ya gonna do ?
Your trade allocation size should not be based just on what you want to limit your losses to. And, if your trading is short term and your expected profits are thin, commissions on very small trade sizes will reduce your profit potential.
Paper trading will reveal strategies which don't work. When you believe you've got something that does work, trade it small with real money. The psychology of money and how it affects your greed/fear/discipline is a big part of winning or losing. You can later scale up to bigger size if successful.
I agree with what Robert said. I would like to add that one needs to focus hard on the original problem. Why do people not stick to thier trading plans. Do they put them down in writing? Is it emotions getting the best of them? Perhaps its distractions in the room during trading? These are potential factors in addition to possinly being freaked out by position size.