Undertrading vs Overtrading.. your thoughts?

[Millionaire]

Quote. from market wizards:

I learned how to play poker at a very young age. My father taught me the concept of playing the 75 percentage hands. You don't just play every hand and stay through every card, because if you do, you will have a much higher probability of losing. You should play the good hands, and drop out of the poor hands, forfeiting the ante. When more of the cards are on the table and you have a very strong hand—in other words, when you feel the percentages are skewed in your favor—you raise and play that hand to the hilt. If you apply the same principles of poker strategy to trading, it increases your odds of winning significantly. I have always tried to keep the concept of patience in mind by waiting for the right trade, just like you wait for the percentage hand in poker. If a trade doesn't look right, you get out and take a small loss; it's precisely equivalent to forfeiting the ante by dropping out of a poor hand in poker. On the other hand, when the percentages seem to be strongly in your favor, you should be aggressive and really try to leverage the trade similar to the way you raise on the good hands in poker.

 

[Millionaire]

This is due to the subconscious mind which has already been programmed when you were a
small kid.

The Subconscious mind was programmed 100s of millions of years ago. The Amygdala evolved around 200 million years ago.

 

[themickey]

But even if I just traded without teaching I'd still trade small, trade frequently. Good points.
Like these trades I'm in from last week. Small size, small gains.... I'll scale up if they keep going up. If they go down, small stops.

Agree with all your points. It's more comfortable, safer as can diversify more, keeps one interested as holding just a couple of positions is boring.
However the last point, there is another way. If one has done some fundamental homework, when it goes down buy more. A little like @volpri mentions, IN THE RIGHT CIRCUMSTANCES, scaling down to get a better entry price is worth considering. This is where trading small size works, one can take incremental small bites at better prices.

 

[themickey]

Agree with all your points. It's more comfortable, safer as can diversify more, keeps one interested as holding just a couple of positions is boring.
However the last point, there is another way. If one has done some fundamental homework, when it goes down buy more. A little like @volpri mentions, IN THE RIGHT CIRCUMSTANCES, scaling down to get a better entry price is worth considering. This is where trading small size works, one can take incremental small bites at better prices.

Adding to this; there is no difference to a trader having numerous small sized resting orders down at lower levels hoping to snap up bargains than scaling down on existing positions.

 

[wrbtrader]

I prefer trading small, trading often to minimize risk per trade. My best winning months have been those with many trades.

Good point re hard to keep track of, especially when markets are volatile

Ken,

I've been given more attention to the psychology of changing my position size due to changes in the risk but one of the ways I do that is by monitoring the volatility in the markets.

• Thus, there's a psychological variable and a volatility variable.

There are days when a trade is put on...I feel like the size is right for the volatility...then boom...something changes in the market volatility in which I either regret the current position size as in wishing I had fewer contracts or more contracts.

Current market conditions since the 2020 U.S. Presidential Elections...I've decreased my position size by about 50% on average because I feel uneasy with the market conditions. Yet, it's a constant psychological battle...one day I'm trading very small and the next day I'm trading a larger position size that's closer to that 50%.

Regardless, I do see a relationship between trading small and often that results in improved trading results but there's another result...less stress because the risk is less ???

My point, I believe there's a psychological variable to drawing a line to connect the dots between undertrading and overtrading and those lines often also go through the position size of the trade and the volatility in the markets.

wrbtrader

 

[taojaxx]

Each trade is an opportunity to screw it up. At least for little ol' me. So my guiding principle is "cut losses. let winners run". Therefore I kill my losing trades early and let the winning ones stay on. Forever. Or almost.
Works for me.

 

[jnbadger]

A balance between the two has worked for me over the last 20 years.

Edit: Yes I've been at this for 25, but I really really sucked for the first 5.

 

[Overnight]

Each trade is an opportunity to screw it up. At least for little ol' me. So my guiding principle is "cut losses. let winners run". Therefore I kill my losing trades early and let the winning ones stay on. Forever. Or almost.
Works for me.

So what happens when your winning trade becomes a losing trade? You must be closing on losers only then.

 

[deaddog]

So what happens when your winning trade becomes a losing trade? You must be closing on losers only then.

Shouldn't happen if you trail a stop.

 

[Overnight]

Shouldn't happen if you trail a stop.

That is the exact same thing as cutting your winners early. That is not letting your winners run, or "stay on", as Tao put it.