Sizing tip for larger traders.

A

alex.samant

Since trading large can have an emotional effect on most of the traders and can lead to sloppy trading decisions... I thought of a potential trick (just crossed my mind) that can distract traders from the size of the trades and possibly lead to much calmer decisions with ... larger size than initially planned.

Let's say you have an 100k account and you normally take a trade while risking 2% of your capital. If risking 2.000 on a single trade and having no more risk to spare on other trades, i thought, why no split up your capital in fifths, like have five 20k accounts and trade 2% from each, heck, maybe you can lift it to about 4%, so it comes to the size you are actually comfortable with and also have accounts available to take other trades.

Is anyone doing this? How do you see this?
 
Don't think it would help at all.

There certainly are emotional blocks with trading size. They can have very high opportunity costs.

Automating my system helped me lot with increasing size. All of sudden, it was the system having a bad day, not me personally messing up. (I still mess up, I just have a much better idea if it is me messing up vs the strategy messing up. )

That really helped me.

P.S. There aren't many markets that I am familiar with where 100k is considered any kind of size.
 
Multiple accounts is a good way to do this and managing each as seperate vs. whole. Trading is just a mind game of perception.

Quote from alex.samant:

Since trading large can have an emotional effect on most of the traders and can lead to sloppy trading decisions... I thought of a potential trick (just crossed my mind) that can distract traders from the size of the trades and possibly lead to much calmer decisions with ... larger size than initially planned.

Let's say you have an 100k account and you normally take a trade while risking 2% of your capital. If risking 2.000 on a single trade and having no more risk to spare on other trades, i thought, why no split up your capital in fifths, like have five 20k accounts and trade 2% from each, heck, maybe you can lift it to about 4%, so it comes to the size you are actually comfortable with and also have accounts available to take other trades.

Is anyone doing this? How do you see this?
More...
 
minmike: First of all I was talking about traders and not markets. For a retail trader an 100k account is a decent sized trading account. Second of all, I was giving 100k just an example. It had no relevance if it was 100k or 100million. The PS was not necessary. I hope you realize that. I appreciate your input though. Yes, automation takes the emotion away, but for discretionary traders and for traders that like to do it themselves, day in and day out, that really love this as a job, automation is not an option.

Tracy: thanks for your input. yes, emotions are the root cause of many of the problems in trading.
 
Quote from alex.samant:

minmike: First of all I was talking about traders and not markets. For a retail trader an 100k account is a decent sized trading account. Second of all, I was giving 100k just an example. It had no relevance if it was 100k or 100million. The PS was not necessary. I hope you realize that. I appreciate your input though. Yes, automation takes the emotion away, but for discretionary traders and for traders that like to do it themselves, day in and day out, that really love this as a job, automation is not an option.

Tracy: thanks for your input. yes, emotions are the root cause of many of the problems in trading.
More...

Sorry the PS bothered you.

I used to think automation wasn't any option. I sat there day in and day out clicking away, thinking I was a discretionary trader.

Then I sat down, formulated my rules in writing, tested and automated them. I won't run my programs unless I am sitting there watching them. It is what I do all day, and sometimes a lot of the evening.

It is/was possible for me to make the change and it helped me soar to new account highs. Just food for thought.
 
I've found the opposite. Automation is not so scalable, because it's nearly impossible to create rules to identify waves of liquidity that you need to buy or dump more shares. Quant strategies found out in Aug, they couldnt' get out without MASSIVE slippage.

I like the idea of lot of smaller accounts. That's what alot of multistrategy hedge funds do, cut up the assets into 20 sub-portfolios and sub-PM's, each doing seperate things. You remain relatively liquid as you grow your assets.

Quote from minmike:

Sorry the PS bothered you.

I used to think automation wasn't any option. I sat there day in and day out clicking away, thinking I was a discretionary trader.

Then I sat down, formulated my rules in writing, tested and automated them. I won't run my programs unless I am sitting there watching them. It is what I do all day, and sometimes a lot of the evening.

It is/was possible for me to make the change and it helped me soar to new account highs. Just food for thought.
More...
 
Quote from Tracy McGreedy:

I've found the opposite. Automation is not so scalable, because it's nearly impossible to create rules to identify waves of liquidity that you need to buy or dump more shares. Quant strategies found out in Aug, they couldnt' get out without MASSIVE slippage.

I like the idea of lot of smaller accounts. That's what alot of multistrategy hedge funds do, cut up the assets into 20 sub-portfolios and sub-PM's, each doing seperate things. You remain relatively liquid as you grow your assets.
More...

The OP started by talking about the "emotional effect" affecting a retail trader. Not comparable to hedge funds in Aug.

It all depends on what you are trading and how you are trading it. What I'm talking about has worked for me. It might work for no one else, or it might. I don't know.

I think that Multi Strat hedge funds break up the accounts for other reasons, mainly to track each strategies performance. But I could be wrong.
 
yes. hedge funds break up accounts and the reason mike mentioned is one of them.

for a retail trader, there is another advantage of splitting up and keeping it low in size

when he wants to withdraw funds, the withdrawals will be smaller and therefore the broker will not become aware he is being emptied...
 
Quote from alex.samant:

Since trading large can have an emotional effect on most of the traders and can lead to sloppy trading decisions... I thought of a potential trick (just crossed my mind) that can distract traders from the size of the trades and possibly lead to much calmer decisions with ... larger size than initially planned.

Let's say you have an 100k account and you normally take a trade while risking 2% of your capital. If risking 2.000 on a single trade and having no more risk to spare on other trades, i thought, why no split up your capital in fifths, like have five 20k accounts and trade 2% from each, heck, maybe you can lift it to about 4%, so it comes to the size you are actually comfortable with and also have accounts available to take other trades.

Is anyone doing this? How do you see this?
More...



You are always to have your focus on the stock and what it is doing. Not the money or your position. Certain markets and time of the day call for certain position size.
 
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