When should I increase my "size"?

Discussion in 'Trading' started by fan27, Aug 27, 2003.

  1. Tea

    Tea

    Or you could switch to trading the diamonds DIA with the idea of moving on to the Dow YM futures which has a smaller tick size than ES.
     
    #11     Aug 27, 2003
  2. 2K SPY??? 200K....

    one day.. one day i'll get there...
     
    #12     Aug 27, 2003
  3. do you trade QQQ?? i'm contemplating to attempt scalping qqq.
     
    #13     Aug 27, 2003
  4. You can estimate your worst case scenario drawdown by taking all your losing trades for a month and adding up the points. (Leave out all the winning trades).

    Then you can pick a safe trading size by taking the max drawdown in $$ you could still feel OK with, and dividing by the number of points.

    In other words you are saying... "what if I had all my losing trades in a row". If you know you could still have survived that, then you know your size is probably OK.
     
    #14     Aug 27, 2003
  5. Unless you are trading 100 shares of BRK.A

    And even then it will only make a difference if you are not a multi-millionaire.
     
    #15     Aug 27, 2003
  6. LOL, I had no idea what that symbol was. Thank you Lobster, I stand corrected. :D
     
    #16     Aug 27, 2003
  7. fan27,

    This might not apply to your situation at all, but one thing you have to be very careful about is this:

    If you look at the eminis and "take your signals" from them, then you might be making money only off of slightly slower traders in SPY. By that I mean, if a huge buy order takes out several levels in ES, chances are a couple of seconds after that someone will not have cancelled his sell order in SPY yet (maybe he is being distracted, using an HTML interface to enter and cancel orders, etc. etc.). Just picking off these traders on 100 share lots will easily yield the $10 per day you appear to be making.

    But if you jump from SPY to ES, those opportunities simply won't be there, because they will have been taken out by the original huge order.

    The way I have been increasing my size was probably quite unorthodox and fairly emotional, and therefore some people will probably consider it wrong: After being fairly consistently profitable trading 100 BAC, I did 200 for a week or two, then started doing 300, and I found that I was cutting my winners too early. I went back to 100 share lots, and SURPRISE! Now that my mind set was that these 100 shares were miniscule compared to the risk I had with 300 shares, I made more money with fewer trades. Then, after a month or so, I started to think, It's working, I am making more and more, let's switch back to 300 share lots. Basically, the whole story repeated itself, and I kept decreasing and increasing my size, but in time I grew more and more accustomed to larger size, and I am now at the point where 300 shares of MMM or 1000 shares of HD don't scare me anymore. I have never traded twice that size, and I think I would not be ready for it. Maybe in six months or a year. Or maybe I'll try it tomorrow, now that I have become curious as to how it would affect me.

    I guess, all you can take away from this is, Everyone has to find his own way. Don't let statements like "If you only make 5% per day, you must be a horrible scalper." or "If you could average 0.2% per day you would beat the best money managers." influence you one way or another. Same goes for "If I don't make at least $10k a day, it's not worth my time." or "It doesn't matter whether I make money or not, the important thing is that I stick with my strategy."

    Those are all valid statements, but they are valid only for certain persons in certain situations. Don't try to compare yourself to them, you have to decide for yourself how you want to spend your time and how you want to handle your finances. Other than that, yes it is possible to make several thousand percent per year in the market, and yes it is impossible to make more than maybe 30% per year in the market. It just depends on how you define your parameters. Don't let these numbers cloud your mind.
     
    #17     Aug 27, 2003
  8. fan27

    fan27

    Hey Lobster,

    Thanks for the comments. I agree that I am gaining about one ES tick when entering a Trade on SPY and taking my signal off of ES due to the lag. But thats about it. Though a huge buy order could take out several levels on ES, that is not the norm when I am entering trades. I attempt to enter just as ES resumes its trend. I have recently been trying to focus more on the 5 min chart as opposed to only the 1 min. I think by doing this, the transition from SPY to ES will be smoother.

    As far as increasing my share size, I have definitely considered the psychological impact and have decided to take it slow.
     
    #18     Aug 27, 2003
  9. Miki

    Miki

    Increase the size when you stop feeling the pain!
     
    #19     Aug 28, 2003
  10. Swish

    Swish

    All this thread captured in one simple sentence - I love it!

    :D :D :D

    Swish
     
    #20     Aug 28, 2003