How "Pros" size their trades

[Daring]

Pros buy low or short high, then as things begin to work as intended, they add to their trades.

They don't add to losers.

 

[Scataphagos]

Quote from Doobs789:

I can quote quantifiable edge for each trade I do. If there was no edge I wouldn't make any money.

If you think you "have an edge", I believe you are deluding yourself.

Just my humble opinion... lotta years in the markets... netted $Millions for myself and clients... still don't believe in the concept of "edge"... other than the illegal kind.

(Perhaps it's the "definition of edge" which is in question.. ??)

 

[Doobs789]

Quote from Scataphagos:

If you think you "have an edge", I believe you are deluding yourself.

Just my humble opinion... lotta years in the markets... netted $Millions for myself and clients... still don't believe in the concept of "edge"... other than the illegal kind.

(Perhaps it's the "definition of edge" which is in question.. ??)

Perhaps our definitions vary. When I say "edge," I don't mean guaranteed profits, or some type of arb. It's simply a way to find and evaluate trades, they can still go against me. Basically;

market price minus theo value = +/- edge

 

[Yana]

Quote from Chuck Krug:

quantum aum is 30b
say they use 4:1 margin
a 1 billion position is less than 1% of buying power/ working capital.
So indeed is not a very big position for them

Did Quantum have 30b aum back in 92 when they shorted the pound? I think they were much smaller back then. The whole hedge fund industry barely had 40b aum combined back in early 90s.

There are a lot of other guys talking about how they pulled off big trades early on and after they were made man they all of a sudden started cautioning everyone to be mr. prudent.

Maybe they are trying to tell everyone these are lucky results of survivor bias and their paths are not replicable

 

[oldtime]

Quote from Yana:

Did Quantum have 30b aum back in 92 when they shorted the pound? I think they were much smaller back then. The whole hedge fund industry barely had 40b aum combined back in early 90s.

There are a lot of other guys talking about how they pulled off big trades early on and after they were made man they all of a sudden started cautioning everyone to be mr. prudent.

Maybe they are trying to tell everyone these are lucky results of survivor bias and their paths are not replicable

couldn't agree more

every old trader has that story about the "One Big Trade"

but you are correct, it's not replicable

but every young trader should know, you work hard, you follow the rules, abide by sound money management, and when the big trade comes along you have the experience to break the rules, and hopefully live to tell the story.

Maybe they will even talk about you.

 

[ofthomas]

Quote from Yana:

All:

You often hear people say allocate no more than 5%/2%/1% of risk capital per trade. But when you read through market wizard type interviews, you find guys recounting their rags-to-riches stories of how they made it through a few big trades. e.g. between Druckenmiller and Soros:
"How big a position do you have?" he asked.
"One billion dollars," I answered.
"You call that a position?" he said dismissingly. He encouraged me to double my position. I did, and the trade went dramatically further in our favor.

....

What do you think?

but what you are skipping, which is the rest of the story, the reason for him to put on additional size was his analysis was correct and his initial bet had proven it... once they knew they were in the money, they just leaned on it for all they could milk it for...

 

[oldtime]

Quote from ofthomas:

but what you are skipping, which is the rest of the story, the reason for him to put on additional size was his analysis was correct and his initial bet had proven it... once they knew they were in the money, they just leaned on it for all they could milk it for...

it goes both ways

one time we were looking for a 10% increase in the price of corn

that was a lot back then

so everybody just started piling on long

I mean, we were adding like crazy

Once it hit 9%, only myself, and the guy who got me on the trade were selling

don't know what happened to the rest of them

not my concern

 

[ofthomas]

Quote from oldtime:

it goes both ways

one time we were looking for a 10% increase in the price of corn

that was a lot back then

so everybody just started piling on long

I mean, we were adding like crazy

Once it hit 9%, only myself, and the guy who got me on the trade were selling

don't know what happened to the rest of them

not my concern

everyone still leaned on the expectations/conditions that proved the trade was good... you exited at a % of the expectation based on whatever you saw it was good/great... everyone else that was greedy might have gotten slaugthered... there might have been also those that exited @ 80% and change their bias or waited for the 9-10% to come along to start shorting after they had been out... so you are right, it goes both ways... but one increases the size usually only after the trade idea is proven.. IMO of course.

 

[oldtime]

Quote from ofthomas:

everyone still leaned on the expectations/conditions that proved the trade was good... you exited at a % of the expectation based on whatever you saw it was good/great... everyone else that was greedy might have gotten slaugthered... there might have been also those that exited @ 80% and change their bias or waited for the 9-10% to come along to start shorting after they had been out... so you are right, it goes both ways... but one increases the size usually only after the trade idea is proven.. IMO of course.

well, I don't like to talk about it, because it causes so much contention, and I am tired of defending it

but I also add when it moves against me

good luck with your trading

and I'm sure you wish me the same

 

[FrankSlaughtery]

the quantum fund trade had $10B behind it - it was not a billion. the idea was drunkenmiller's but soros was the one who convinced him to go big or go home.