Thursday, 13 October 2011

What It Takes To Increase Your Size

The title of this post is a little racy but the subject matter is of great importance to most traders.

After a history of being a losing trader, you finally find the answer you have been looking for. You work hard and achieve CP in SIM. You then get to the next milestone of achieving CP as a 1 lot trader. You open the champagne, throw the party, buy all the magazines with the best sports cars and try to decide on the colour.

You then realize you have another issue. Size matters. Without increasing the size you are trading, you can't afford the car, the house and the life you are after. This is perhaps the last type of hurdle you have to surpass.

I have been there and done that. I have mentored people who have been there and done that.

My considered opinion is that this is a hurdle because of the early history of losses. That memory is deeply embedded in our psyches and it takes specific work and concentration to overcome it.

The first step is to develop a deep belief in your methodology and your ability to be consistent. The way to do this is by backtesting and by being consistent. Once you have achieved that, increasing size a tiny step at a time is the way to go. The first couple of steps are the most difficult because if you were trading 1 lot and are now trading 2 lots then it's a 100% increase. If this is difficult, go back to SIM and validate the size as CP and then go live, repeating the SIM to LIVE steps each time you increase you size until the increase would not be so large a percentage.

These three milestones: CP in SIM, CP LIVE 1 lot and CP with size are three distinct phases of trader development that need to be managed.

Today was the usual rock 'n roll. The chart you are looking at is the type of chart I mark to decide what type of trades I want to trade. I then create a TP and an algo to catch those trades and back test for the right basic metrics.

I was trading the ES and the DAX. The chart below is of the ES. Notice the Fib level held for quite a while. Look at your charts and you can see what happened next. It was odds on to happen.


  1. I guess size does matter. Great post. I got short this shortly after the open at 93.25 when the order flow showed lack of follow through to close the gap. The context is negative but there is lack of follow through to the down side as well. I'm watching Oct 10 VAH and Oct low of the day. Heading into lunch time looking like another consolidation day with a late day push.

  2. EL I was wondering what is happening when you have a large positive VB bar/Delta bar and the market sells off. Is the paper buying breakouts at Resistance where the market orders are overwhelmed by limit orders. Is that how the Big money hides there trades?