what is the right size for beginners, intermediate and advanced FUTURES traders?

B

Bond-Speculator

I trade the 30 year bond. Just curious about what people think about size in futures trading.

Futures trading allows for more leverage than practically any other market out there (a possible exception is currencies which I know very little about). With a $10,000 account one could trade 24 contracts at a time (or even more at some places).

I've been trading Futures for the past 10 or so years (options for 5 years before that). In the very beginning of my career I went crazy with size and saw my $20,000 stake turn into $50,000 in just two months only to see my $50,000 account just as quickly become $2000 in just four months. That experience has taught me quite a lot (whenever I'm in a losing streak that horrifying four months of infamy always comes to mind) and has caused me to develop a very deep respect for position size. Fortunately, I learned this lesson very early on. Right now I trade 1 lot of bonds for every $20,000 I have in my account. I have various accounts with various brokers and so if my account balance is cumulatively $500,000, I will allow myself to trade, at maximum, 25 contracts at a time with any of the accounts I have open (i.e. i may have $50,000 with one firm but will allow myself to trade 25 contracts there if my cumulative balance is $500000).

I'd love to hear from other seasoned futures traders on the subject of position size. Some of my friends have been telling me for years that I am too conservative and that I should be trading more size than just 25 lots. The fact is, there is no move with 25 lots that could possibly wipe out a $500,000 account or even come close to it (assuming I cut the loss immediately) and so I feel safe in adhering to the number one rule in futures trading: capital preservation. If I ever want to trade more than 25 lots all I have to do is deposit an additional $20,000 per contract. For the 10 year note, I allow myself to trade 1 lot for every $10,000.

Any other ideas on this? What kind of size would you guys recommend for the 10-year Note and the 30-year Bond. Am i really being too conservative here? I've actually been trading 40 lots maximum in the bonds for 3 years now. Rather than increase the size of my accounts I've been pulling money out. Let me know what you think....

Thanks
 
I THINK IT HAS TO DO WITH COMFORT LEVELS AND CONFIDENCE.
yOU SHOULD START SMALL AND AS THE CONFIDENCE COMES YOU MOVE UP AND KEEP MOVING UP. AND YOU KNOW WHY YOU DON'T STAY AT A CERTAIN LEVEL OF CONTRACTS? BECAUSE TRADING IS LIKE BLACK JACK NO MATTER WHAT ANYBODY SAYS A RUN ONLY LASTS SO LONG. SO SOAK UP AS MUCH OF THE WINS AS YOU CAN.
 
Quote from Bond-Speculator:

I trade the 30 year bond. Just curious about what people think about size in futures trading.

Futures trading allows for more leverage than practically any other market out there (a possible exception is currencies which I know very little about). With a $10,000 account one could trade 24 contracts at a time (or even more at some places).

I've been trading Futures for the past 10 or so years (options for 5 years before that). In the very beginning of my career I went crazy with size and saw my $20,000 stake turn into $50,000 in just two months only to see my $50,000 account just as quickly become $2000 in just four months. That experience has taught me quite a lot (whenever I'm in a losing streak that horrifying four months of infamy always comes to mind) and has caused me to develop a very deep respect for position size. Fortunately, I learned this lesson very early on. Right now I trade 1 lot of bonds for every $20,000 I have in my account. I have various accounts with various brokers and so if my account balance is cumulatively $500,000, I will allow myself to trade, at maximum, 25 contracts at a time with any of the accounts I have open (i.e. i may have $50,000 with one firm but will allow myself to trade 25 contracts there if my cumulative balance is $500000).

I'd love to hear from other seasoned futures traders on the subject of position size. Some of my friends have been telling me for years that I am too conservative and that I should be trading more size than just 25 lots. The fact is, there is no move with 25 lots that could possibly wipe out a $500,000 account or even come close to it (assuming I cut the loss immediately) and so I feel safe in adhering to the number one rule in futures trading: capital preservation. If I ever want to trade more than 25 lots all I have to do is deposit an additional $20,000 per contract. For the 10 year note, I allow myself to trade 1 lot for every $10,000.

Any other ideas on this? What kind of size would you guys recommend for the 10-year Note and the 30-year Bond. Am i really being too conservative here? I've actually been trading 40 lots maximum in the bonds for 3 years now. Rather than increase the size of my accounts I've been pulling money out. Let me know what you think....

Thanks
More...

You've been trading futures for +10 years and you should know by now that not every day is the same for your trading instrument.

Therefore, you should know that your position size shouldn't be the same every trading day due to different risks and rewards.

You should also know your trading instrument intimately enough to know when to increase the size and when to decrease the size.

Simply, position size management can be an edge if you understand the price behavior of your trading instrument.

Position Size Management is just an additional money management tool.

In other words, as long as your not violating your overall money management rules...

As long as you know what particular time of the year to be trading with an increased size in Bonds...

Position Size Management should be an edge for you.

Too many traders (I've done it too) increase their size during the wrong time period of the year for their particular trading instrument even though they aren't violating any money management rule.

For example, you said you trade 1 lot of bonds for every 20k.

Lets say at one broker you have 100k.

That means via your own money management rule you shouldn't be trading more than 5 contracts.

However, the bonds may be trading in a way that you should be trading less size...

Position size management.

You can take this in many different other ways.

Lets say your stats show you that 70% of trades in the a.m. trading session are winners whearas only 40% of your trades in the p.m. trading session are winners.

A veteran trader isn't going to trade the same size in the p.m. trading session...

He or she will reduce their position size or vice versa if your more profitable in the p.m. trading session in comparison to the a.m. trading session.

Thus, trading the same size every trading day as if the price action is the same every trading day is counter-productive and will impact negatively on your bottom line regardless if your profitable or not.

Know the price action of your trading instrument.

Mark
 
Quote from NihabaAshi:

You've been trading futures for +10 years and you should know by now that not every day is the same for your trading instrument.

Therefore, you should know that your position size shouldn't be the same every trading day due to different risks and rewards.

You should also know your trading instrument intimately enough to know when to increase the size and when to decrease the size.

Simply, position size management can be an edge if you understand the price behavior of your trading instrument.

Position Size Management is just an additional money management tool.

In other words, as long as your not violating your overall money management rules...

As long as you know what particular time of the year to be trading with an increased size in Bonds...

Position Size Management should be an edge for you.

Too many traders (I've done it too) increase their size during the wrong time period of the year for their particular trading instrument even though they aren't violating any money management rule.

For example, you said you trade 1 lot of bonds for every 20k.

Lets say at one broker you have 100k.

That means via your own money management rule you shouldn't be trading more than 5 contracts.

However, the bonds may be trading in a way that you should be trading less size...

Position size management.

You can take this in many different other ways.

Lets say your stats show you that 70% of trades in the a.m. trading session are winners whearas only 40% of your trades in the p.m. trading session are winners.

A veteran trader isn't going to trade the same size in the p.m. trading session...

He or she will reduce their position size or vice versa if your more profitable in the p.m. trading session in comparison to the a.m. trading session.

Thus, trading the same size every trading day as if the price action is the same every trading day is counter-productive and will impact negatively on your bottom line regardless if your profitable or not.

Know the price action of your trading instrument.

Mark
More...

I appreciate you telling me what I "should know." Sometimes, it seems as if I am still having to relearn things I should know (for example, I still find myself sometimes getting caught up in flat markets....mondays tend to be flat and I've known this for years....why do I still trade on mondays? i don't know i guess i suffer from the "can't sit at a computer screen all day and not put on a trade" syndrome). I make most of my money trading economic numbers. Perhaps with you your trades can be broken down into AM/PM. For me it is ECONOMIC NUMBER/NO ECONOMIC NUMBER. I have not recognized any pattern of certain times for trading being more profitable than others. For me, it all comes down to the economic numbers.

I have a slightly different take on trading size. I think of it in this way: back in the 90's, after I discovered my own optimal trading size per $$$ in my account, I came up with my 1 contract per $20,000 rule. I started trading 2 contracts with a $45,000 account. After a few months of flirting with $40,000, I started to build equity in my account. I always made sure that my promotions to greater size only came with a promotion in my equity (i.e. i didn't trade 3 lots until I got up to $60,000). One thing that may differentiate me from most other traders is that once I am promoted to a certain size, I tend to use that size as my normal position size (for example, with $100,000 account I allow my self to trade 5-lots and so most of my trades would be 5-lots all-in rather than an average up or down to 5-lots). I believe this way of trading is beneficial to me because the risk I am taking with 100,000 and a 5-lot is the same risk I'd be taking with $20,000 and a 1-lot. Of course, if I lose money and get below 100,000 then I'd immediately shift my position size to 4-lots until I am back up above 100,000. Of course, I tend to average positions up on certain occassions (for example I'll never buy 25-lots all at once immediately after or before an important ecnomic number comes out...usually in that case I'll average in with an 11-lot followed by two more 7-lots. I have found that this is a good way to manage risk. If I have a streak of losses I immediately cut my position size in half until that streak is clearly behind me.

I know a great deal about these markets and I've learned quite a lot over the past many years. This posting is just an attempt at understanding what the general consensus is regarding position size versus account size. How conservative am I actually being in comparison to the majority of profitable traders out there? That's all I was getting at!

Like I've said, I've been happily trading 25-lots for about four years now. Rather than increase my position size I've just been taking profits out of my account. I make a good living this way and don't feel the need to trade any bigger than 25-lots.
 
Quote from REDDEC:

I THINK IT HAS TO DO WITH COMFORT LEVELS AND CONFIDENCE.
yOU SHOULD START SMALL AND AS THE CONFIDENCE COMES YOU MOVE UP AND KEEP MOVING UP. AND YOU KNOW WHY YOU DON'T STAY AT A CERTAIN LEVEL OF CONTRACTS? BECAUSE TRADING IS LIKE BLACK JACK NO MATTER WHAT ANYBODY SAYS A RUN ONLY LASTS SO LONG. SO SOAK UP AS MUCH OF THE WINS AS YOU CAN.
More...

I am one of the few people who believe that it is possible to make money consistently in the markets without using size as an edge. What you are saying is that when you are making money be more heavily vested than when you are losing money. This makes quite a bit of sense. However, I see this more as an attempt at cheating the markets. A good trader should be able to make money consistently with a 1-lot. If you can't do that, then you should not be trading anything bigger until you can. I don't care what kind of market you are in: if you can't consistently make money trading with a 1-lot then you need to stick with 1-lots until you are able to do so.

Trading more size when you are doing well may not always work; for example, think about when you are near the end of your winning streak.....you most certainly will not call that end correctly and you will still be trading big size even after your "streak" and there goes your profits. I am a proponent of trading a set number of contracts per certain amount of $$$. if you start with $20,000 and trade 1-lots until you get up to $40,000, then you can conclude that you really earned that promotion to 2-lots. You have proven to yourself that you can make money consistently and you tehrefore deserve a size increase. If you trade a $20,000 account in the way you suggest, let's say trade 10 lots when you are on a winning streak, then you put your account at grave risk because your success would depend upon correctly interpreting the start and end of your winning streak (something I believe is impossible to do). You can easily blow your account out in a matter of weeks trading 10-lots with a $20,000 account.

I guess the answers depend upon the perspective from which you are coming. If you are willing to take $20,000 and virtually gamble it away then be my guest. I'm not prone to doing that; i'm in it for the long haul!

Think about this: would you buy more of a losing stock? If you open a restaurant and it is not doing well, would you open another restaurant just because business is good for a few months? I don't know what other analogy to use: do you put more money into expanding a business that is not consistently doing well in the first place? Does that make sense?

At some point we as traders have to decide what we are looking for: the quick buck or a means for sustaining a consistent living.
 
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