Position Sizing

[wrbtrader]

Quote from PropTraderMTL:

I think you really missed the point of the video. It was not about what setups to take or what to do when "new" news come out. The point of the video was to talk about adding to winning positions... When to really press it and when to lay off.

Your point is that bad news is going to lose you $$ no matter what. Got no arguments about that but it's irrelevant to the aim of the video. There could be a space invasion tomorrow but there ain't sh!t you can do about it. If this happens while the market is closed then your stuck with the position... You can't avoid it.

What you need to worry about is the things you can control. Size is the major one you can control... Entries and Exits are controlable WITH slippage (ie news, system freeze trading halt etc)

Size is one of the only things we have a lot of control over. It isn't any sort of magic bullet that is going to avoid you losses but it is certainly not irrelevant as you claim it to be

I've now located the video that savagemp5 was talking about.

PropTraderMTL...agree.

There's many ways I remember being discussed in another thread here at ET about usefulness of position size management. For example, there's a trade journal in the journal section where the guy admits he trades poorly in certain market conditions along with admitting he doesn't have the discipline to avoid trading in those particular types of market conditions as in being addicted.

That's one situation where I can see position size management being helpful. Thus, he trades with normal size in market conditions he knows he tends to perform well in and dramatically lower his position size in market conditions he knows he performs poorly.

That alone will lower his commissions in poor market conditions, lower his risk exposure while addicted in trading in such poor market conditions...resulting in an improvement in his overall performance without having to make any changes in his entry/exit method while still trying to develop discipline to trade in poor market conditions.

My point is that there's different types of position size management concepts in which some may or may not be useful.

Mark

 

[savagemp5]

I do not have any so-called personal experiences or examples, can't tink of any.

But all I can say is when you have good probability for a trade, then going into with 10-20% of your AUM might help get the returns you want. If its risky, or even side betting, then I guess 3-5% would do well.
eg. Long Oil for Libya crisis. Eg. Short Nikkei during Day 1, Japan crisis. Trades that I went in with 10-20% and made it double out.

That is how I earn my keep so far and very dependent on trade to trade.

As for adding(cutting) or not adding positions, it is as good as 2 separate trades, based on current prices. with "recency bias", you tend to add more positions if you start to profit, but there's isn't any relation between the 2 trades.

No fancy maths no modeling tools to decide if you should add more, as each trade have their own individual market conditions. It is as good as a fresh new Trade, who knows after you add a position things reverse ? Does that mean your position sizing is bad ? Does that mean you method doesn't work ?

I tink we have different opinions and I accept the fact we view stuff differently !

 

[wrbtrader]

Quote from savagemp5:

I do not have any so-called personal experiences or examples, can't tink of any.

But all I can say is when you have good probability for a trade, then going into with 10-20% of your AUM might help get the returns you want. If its risky, or even side betting, then I guess 3-5% would do well.
eg. Long Oil for Libya crisis. Eg. Short Nikkei during Day 1, Japan crisis. Trades that I went in with 10-20% and made it double out.

That is how I earn my keep so far and very dependent on trade to trade.

As for adding(cutting) or not adding positions, it is as good as 2 separate trades, based on current prices. with "recency bias", you tend to add more positions if you start to profit, but there's isn't any relation between the 2 trades.

No fancy maths no modeling tools to decide if you should add more, as each trade have their own individual market conditions. It is as good as a fresh new Trade, who knows after you add a position things reverse ? Does that mean your position sizing is bad ? Does that mean you method doesn't work ?

I tink we have different opinions and I accept the fact we view stuff differently !

I actually agree with what you say now in your clarification but I didn't understand what you were talking about before which is why I was wondering what your personal views were.

As to adding or scaling into a trade position...that's only one type of position size management as I noted in my example of a trade journal here at ET in the journal section where a different type of position size management "would" benefit someone that has discipline problems while trading in poor market conditions with the "same position size" when he should be "reducing" his position size when he doesn't have the discipline to not trade in such poor market conditions...

In comparison to trading with normal position size in favorable market conditions.

That prior thread on the topic of position size management discussed different types/scenarios and I believed there several mentioned...two were via a mathematical model, one involved adding/scaling, another involved discipline/performance issues and others types.

Mark