First off, learn some maths, that would be a good start.
How do you get over the fear of increasing position size?
- Thread starter rin4et
- Start date
When I originally began, I could only margin 80%.
Now? My positions reach into the tens and hundreds of millions. Seriously, I say it everywhere. Read SEC 15c3-1
What instruments do you trade? And what is your average yearly return? I don't use margin.
The methodology is the same regardless, it is about confidence, many books have been written about it. You take a working system, reduce the size to minimal, and increase when you are winning, it keeps losses small.
The subconscious mind is extremely powerful, it can be processing information without you realising it, finances, relationship, family, food, health. Any mistake on your part will turn in to a loss.
So to avoid that you dip your toe in the water, most dive in head first and lose their shirt, the power of money. Over the long term what does it do, it makes you more profitable. You give less to the markets when flat and keep more for yourself when on a roll.
Exactly, although I start with single small positions, they may evolve in to larger single positions due to previous wins, or in to smaller multiple instrument positions. I use the first on low timeframe and the latter on longer timeframes, the net is the same. People don't seem to understand the combination of the markets and your personal confidence/psychology/strategy determine a winning trade, they rarely all intersect.
That's alright. No need to apologize.
I think a reliable charting is the key. 90 to 95% of accuracy. Hard to come by.
Some people may go for large size with 60 to 70 % reliability with profits, but that would be a constant torture of juggling with money management/risk control and a roller coaster of psychological adjustment.
Some people may go for large size with 60 to 70 % reliability with profits, but that would be a constant torture of juggling with money management/risk control and a roller coaster of psychological adjustment.
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I hope I won't offend you by mentioning that for me, the exact opposite is true: I'd far rather make a level-ish average of $100 over each of 100 small trades than do one big trade (a "90%-probability trade") that nets $10k.
I think I have three main reasons for feeling this way (they might turn out to overlap to some extent: that has a habit of happening whenever I say "I have three main reasons"!) ...
First, I'm not convinced that I really believe in "90%-probability trades" - not within my own normal trading parameters, anyway: I recognise, of course, that there can easily be trades with a 90% win-rate, but in my own mind (and I'm saying this after a lot of experience) these tend to be something of an artificial construct created primarily to illustrate that such a thing is possible, rather than regularly repeatable "real world trades" which constitute part of a method with a genuine, proven, positive expectancy.
Secondly, I'm a great believer in statistical significance and the reality that "there's safety in numbers" or "the principle of large numbers" or whatever else one wants to call it: the closer your win-rate is to 50% (on either side of it), the smaller is the number of trades one needs to observe to calculate a safe position-size with a high degree of confidence that one is basing it on genuine statistical significance. On some level, I don't "trust" trades with "90% confidence". I don't mean just "90% confidence in having the overall direction right": obviously an entry method is not a trading method - there's far more to it than that (and I understand that you know this already and meant far more than just that, too).
Thirdly, I feel very much safer and more confident trading "comparatively little and comparatively often" and have really found it both far easier and far more realistic, overall, to make a living that way than with other methods I've tried. Three consecutive accidents with the kind of position-sizing you mentioned in your original post would be an extraordinary disaster for me, giving me a far bigger drawdown than I've had for many years. (And who hasn't, at some point, had three consecutive accidents, even with "very confident trades"?)
I'll be honest - again, very much hoping that I don't offend you - and mention that I saw your original post not long after you made it, was seriously perplexed by it, and decided not to reply only because I suspected that I'd misunderstood what you were saying: it didn't seem possible or reasonable for someone with a substantial account to be risking 6% of that account on a single position. (The way the thread's gone, I'm now more confident that you did indeed mean that, and I wish I'd replied earlier!).
I appreciate that everyone's concepts of risk management and degrees of risk aversion are different, and that we don't all have to agree all the time (and indeed that it would be boring if we did!), but honestly, I'm with the person who posted on the previous page, responding very succinctly to your observation that you want to increase your position-size still further, by saying simply "Don't".
I don't really agree with this. I can "kind of agree, up to a point", but I strongly suspect that you've gone well beyond that point in terms of practical realities.
Trading frequency is relevant, too - not just win-rate.
Very high win-rates tend to preceed accidents.
I understand the attraction of high win-rates (which of course arise from "being ultra-selective"), but I strongly prefer the perspective that what matters isn't "being right as often as possible" but simply "steadily gaining more from the totals of winning trades than you lose from the totals of losers".
I wish you nothing but well with your 90%-confidence trades, but please excuse my mentioning that I'd be distinctly uncomfortable with them, myself, and (call me conservative or even a skepchick) I strongly suspect that I'd probably assess them at a lower figure, too.
By weight of numbers, and by experience, and by calculating my position-sizing far, far more conservatively than I suspect you do, on the basis of far, far bigger sample-sizes than I'm ever going to manage to assemble with very high win-rates (and their concommitantly low trading frequencies). I avoid fear by having great confidence - statistical confidence: every time I enter a trade, I can't tell you with any great confidence whether it will be a winner or a loser, but I can tell you with a really high degree of confidence what the overall outcome of my next 300 trades will be. And that's what matters to me. That confidence, for me, is another name for what you referred to in your title question as "lack of fear" or "getting over the fear". So there you go: at least I've answered your question directly, even if the answer was just my own perspective.
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