A Question about position size and trade duration

Quote from illiquid:


1. Buy 500 shares, target 3 pts (as initially determined)

2. Buy 1000 shares, target 1.5 pts (for the same result as 1)

3. Buy 2000 shares, target .75 pts (same result)

(assume liquidity is adequate for exiting 2k shares without excessive slippage)

500 shares is your preset "comfort" level with this stock, but would doubling the size, cutting the target in half, and reducing duration of the trade be equivalent in risk? I'm guessing most of you would already say "take the 2k and go for original target of 3, if the market is going there it will go regardless" -- but let's not get into that for now. Right now, your initial trade intention is 500 x 3pts; your alternatives are 1000 x 1.5, 2000 x .75. Discuss.
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And if the trade goes against you???
You're looking at how much you can make on the trade. You should look at how much you can lose.
 
Quote from duhmentor:

And if the trade goes against you???
You're looking at how much you can make on the trade. You should look at how much you can lose.
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It's a good point, but then let's take it a step further. You enter in with your initial 500, and it starts going your way. You are presented with an opportunity to add or pyramid up on a winner. Your current target is 3 points but you think: ok this trade is working, 3 pts is likely where it will go but what if I have a chance to double the position and get out at 1.5, reducing time/volume risk in the trade by half? Will there actually be a reduction in risk, since you'd be out of the trade that much sooner? In other words, can cutting the duration of a trade overcome the added risk of a larger position?

Maybe the confusion comes from me looking at it backwards. I know that if you take a large enough position that would affect liquidity on exit, you need to start getting out while the momentum is still going. Perhaps the answer is that Trader A and Trader B are actually putting on different trades altogether, and choosing one trade over another based on different expected holding times is apples and oranges when it comes to risk. Thoughts?
 
Quote from illiquid:

... You see a setup, a signal, a breaking headline -- something that requires your immediate entry. You realize not many have seen what you've seen, and you will be among the first to act upon it...
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Stop here! You're delusional. :)

Also: don't trade based on your P/L because the market doesn't know and doesn't care about it.
 
Quote from charts:

Also: don't trade based on your P/L because the market doesn't know and doesn't care about it.
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Assuming this is true (who's delusional? :)) is probably the only way my argument holds -- that is, the market will not know whether you have 500 or 2000 shares. Therefore sitting for a 1.5pt move is far less risky than 3, no?
 
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