Position Sizing: How do you take advantage?

Discussion in 'Trading' started by tomahawk, May 8, 2011.

Which position sizing techniques do you use?

  1. scale in and out

    5 vote(s)
  2. scale out only

    0 vote(s)
  3. add to winners only

    3 vote(s)
  4. average down only

    1 vote(s)
  5. adjust size according to volatility only

    4 vote(s)
  6. adjust size with discretion (probability-based)

    2 vote(s)
  7. 2 or more of the above

    6 vote(s)
  8. none of the above, I always use the same size per instrument

    5 vote(s)
  1. I am interested in seeing how different traders use position sizing as part of their edge. The poll is open ... please weigh in.


    I guess I do a little of all the options listed, but I mostly adjust size with discretion. For instance I'll size up going the other way after a failed b/o, or when I feel the odds are heavily in my favor for any of various reasons. The key is to not get so big that you can't handle stringing a few losses together with the larger size, because you'll need that larger size on when you finally catch the winner. I also will average down on certain setups, more often with the indices than with commodities.
  2. Thanks for voting guys. It'd be great if we could get a few more than ten. And feel free to expound a little, maybe say a bit about what led to your current sizing method.
  3. MGJ


    I suspect you are actually interested in "position RE-sizing", i.e., changing the size of an existing position, some time after trade entry

    rather than "position sizing" which is choosing the number of lots/shares/contracts at trade entry
  4. wrbtrader


    I was curious too about the same thing.

    Some traders define "position size" via scaling in/out a position whereas others define position size as a change in the number of shares/contracts/lots at trade entry.

    I'm the latter. Thus, I change my position size at entry from one trade to the next trade due to changes in volatility or trade environment conditions. Simply, I don't enter a trade with the same fixed contracts as if the price action is always the same because it's rarely the same...

    I'm just not a fan of the "one size fits all" dress code.

  5. Yeah, both really. I probably could've thought out the poll options better, but your second definition of position sizing I suppose could fall under option 5 in the poll.

    Basically I'm interested in people's usage of multiple lots, in addition to the traditional concept of "position sizing".
  6. Now we're getting somewhere. Does "trade environment conditions" for you ever include any statistical bias, or for example things like extraordinary confluence of S/R? I take it these decisions are completely discretionary.
  7. Depends on the method being employed. For example, I find that mean reversion strategies don't work well with close stops or 'all-at-once' entries, and they can punish adding to winners. I find that trend-following methods work well with close stops, and adding to winners can really juice profitability. Different position management techniques suit different market conditions, there is no one-size-fits-all method. So, use the right tool for the situation at hand. Proper choice of position management technique requires in-depth understanding of both the current and likely future market environment during the lifetime of the trade, and solid understanding of the strengths and weaknesses of each technique and trading vehicle.
  8. kashbg


    I am not sure if I am supposed to admit this but yes I tend to scale into a trade. I am trading forex and if I have a reason to buy, it is not imperative the trade goes in my favour straigh away. If it goes a bit lower I sit put, if it streches down a bit then I add, as long as I am not beyond my get out point. I tend to add when I am close to my get out point and if it continues past that point, I bail out or at least I should.
    I know what you all are going to say, this a recepie for disaster. It works for me though, for now. When I get out of a trade I would like to leave a runner, just in case it goes further, but do not allways do it, still working on it.
    Hope I do not get too much slagging off for those habits.