Position Sizing

Eg. I have 100 positions. 30 are losing and 70 are winning. I cut. My losing trade is 30%. Continously do this and your losing trade % keeps going higher. But wait, what about the rest of the trades ? They are having profits and running up.

Now I may have 60% losing trades or more, simply because I haven't realized the winning ones. But you realized that cutting losing trades means the blood stops bleeding. While the winning ones may, continue hopefully to go up.

And if you know about stats manipulating, which I have done it before, I can simply locked in some winning trades too, keeping my win-lose % nice.

But so what if you have 60-70% winning rates. It just means you are trading often and locking in profits/losses earlier. It doesn't mean you'll make money at the end of the day.
 
Quote from PropTraderMTL:

Good video, this is so important it's not funny. Tough to do but when you do it well it really pays off. Thanks for the link Kingdong
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I agree, this has really improved my trading. I've found that once I'm in Tier 3 (they suggest max should be 6 min should be 4 tiers btw), that its almost a risk free trade. If I'm in 1 and 2 quickly, then thats when most of my risk is present, because by the time I add my third, thats my confirmation that the trade will work and if it doesn't I will tend to scratch on the trade. Of course this is depending on the setup, but in general once I'm above tier 2, its a risk free trade now just comes the part of managing it. Also, usually when I add above 3, I will also hit out of those tiers at breakeven if the trade doesn't work, since again those tiers are my confirmation that the trade is working.

I know a lot of traders, including myself, that experience great success with my risk/reward ratio's, I think it depends on your strategy.
 
If you don't have any idea of what your trade expectation is, then the correct position size is zero.

My recommendation is study markets more and paper trade in a sim account for a while.
 
Quote from KingDong130:

I agree, this has really improved my trading. I've found that once I'm in Tier 3 (they suggest max should be 6 min should be 4 tiers btw), that its almost a risk free trade. If I'm in 1 and 2 quickly, then thats when most of my risk is present, because by the time I add my third, thats my confirmation that the trade will work and if it doesn't I will tend to scratch on the trade. Of course this is depending on the setup, but in general once I'm above tier 2, its a risk free trade now just comes the part of managing it. Also, usually when I add above 3, I will also hit out of those tiers at breakeven if the trade doesn't work, since again those tiers are my confirmation that the trade is working.

I know a lot of traders, including myself, that experience great success with my risk/reward ratio's, I think it depends on your strategy.
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I found I was always getting out of my profitable trades when I should have been adding. Mentally it's hard not to take the profits but in the long run you need those big trades.

The frustrating thing with my system is it uses FIFO rather then LIFO (I use Sterling). I know it doesn't make a difference in $$ but I would find it easier to monitor my entries if my core position remained the same rather then the average price increasing when I exit 1 or 2 tiers. I guess it's just my OCD but it would be nice to use LIFO. I think they used to have it but not anymore
 
Im surprised. I think im not a novice trader anymore. When the guy in the video link starts explaining "technical charts", things that happen of a past/history, everything he say is magical.

I took less than 20 seconds to view the entire video. More surprise to see forum replies... if u guys seriously wanna improve, you need to change the way you trade.

Things that won't apply:

- If Fed announces interest rates to 0.5%
- If the company issues more shares
- If multiple hedge funds dumps the stock together
- If unemployment rate rises to 9.4%.

I don't see how any position sizing helps at all.

My 2 cents worth.
 
Quote from savagemp5:

...I don't see how any position sizing helps at all.

My 2 cents worth.
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Hi,

Just curious about your example of a situation that involves position size management that wouldn't help.

Mark
 
Based on event driven or economic or a single stock, news that will move the prices. I'll repeat:

Nice size but stock slumps:

- If Fed announces interest rates to 0.5%
- If the company issues more shares
- If multiple hedge funds dumps the stock together
- If unemployment rate rises to 9.4%.

Nice size but prices increases:

- If Fed announces interest rates remains
- If the company buy back shares
- If multiple hedge funds pushes the stock together
- If unemployment rate drops to 8.2%.

There's nothing that says "good" or "nice" position sizing = profit, bad position sizing = sure loss, based on the video link. If we go on, we'll eventually reach CAPM, MPT, EMH and it never ends.
 
Quote from savagemp5:

Based on event driven or economic or a single stock, news that will move the prices. I'll repeat:

Nice size but stock slumps:

- If Fed announces interest rates to 0.5%
- If the company issues more shares
- If multiple hedge funds dumps the stock together
- If unemployment rate rises to 9.4%.

Nice size but prices increases:

- If Fed announces interest rates remains
- If the company buy back shares
- If multiple hedge funds pushes the stock together
- If unemployment rate drops to 8.2%.

There's nothing that says "good" or "nice" position sizing = profit, bad position sizing = sure loss, based on the video link. If we go on, we'll eventually reach CAPM, MPT, EMH and it never ends.
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Sorry...I'm not following you nor do I know what video link you're talking about. :confused:

I was just wondering about your "personal experiences" involving position size management that did not help you.

Mark
 
Quote from savagemp5:

Im surprised. I think im not a novice trader anymore. When the guy in the video link starts explaining "technical charts", things that happen of a past/history, everything he say is magical.

I took less than 20 seconds to view the entire video. More surprise to see forum replies... if u guys seriously wanna improve, you need to change the way you trade.

Things that won't apply:

- If Fed announces interest rates to 0.5%
- If the company issues more shares
- If multiple hedge funds dumps the stock together
- If unemployment rate rises to 9.4%.

I don't see how any position sizing helps at all.

My 2 cents worth.
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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
 
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