When to trade maximum position size?
BPA trading room Q&A: July 6, 2016
Question: Do you ever enter trades at your maximum size, or do you always allow for a possibility of scaling in?
Audio duration: 2min 15sec
Context rules – size accordingly
A lot of times, I just do my maximum size. Like in this kind of situation [B19/20], I just hit “buy the market” somewhere in there and just hold my nose and manage the trade.
But in a situation like this [Tight trading range B32-41], if I’m selling that high [B38], I’m trading small — a lot of times a quarter position size, a third position size. I’m trading small using really wide stops, and scaling in higher or on the way down buying below bars, same thing.
The most of my trades are not my full position size. A lot of them become my full position size, because I’ll enter a second time, sometimes a third time, but most of the time, when I see a lot of two-sided trading, I’m not trading full position size, because I want to allow the possibility of adding in, without adding stress.
If I initially take a limit order trade at full position size and the market pulls back a point or two and I add on, then I’m two times position size, three times position size. I don’t want to be doing that, you know, because I’ll be stressed, right? I’m a guy; I’m a person and I have feelings and I would be telling myself — I would feel bad; I would be feeling like, “Al, you idiot. That’s not how you trade. Why are you doing that?” So I would be hard on myself, and I never want to do that.
“Maybe this time” trades
There are ways to trade to make money and that’s what I only want, that’s all I want to do. And I don’t want to say, “Oh, maybe this time, you know, it will be different.” No, I’m going to do what has worked and I’m going to avoid “maybe this time” type of trades.
Also, most traders who trade a long time have good size accounts, they have multiple accounts, and they are trading a small portion of their accounts. They can trade many times larger. So, in a way, I am somewhat flexible. Sometimes I trade more than my maximum position size, but rarely. I prefer to trade my position size or smaller, and that way there, I don’t worry about anything.