{"id":38659,"date":"2015-05-03T03:33:56","date_gmt":"2015-05-03T10:33:56","guid":{"rendered":"https:\/\/brookstradingcourse.com\/?p=38659"},"modified":"2015-08-14T09:57:49","modified_gmt":"2015-08-14T16:57:49","slug":"trade-management-position-sizing","status":"publish","type":"post","link":"https:\/\/www.brookstradingcourse.com\/pt-br\/ask-al\/trade-management-position-sizing\/","title":{"rendered":"Ask Al: Trade management—position sizing"},"content":{"rendered":"

BPA trading room discussion: March 5, 2015<\/h2>\n

Discussion during webinar after potential first leg of bear channel was forming at about 08:11 PST. Al talked about trade management – in particular position sizing considerations – for traders who were scalping or swinging a trade from the start of the bear leg.
\nAudio duration: 2min 45sec \u2014 Scroll down for image<\/em><\/p>\n

 <\/p>\n

Audio transcript<\/h2>\n

17 ticks below the 17 low \u2013 18 ticks now. I think you definitely have to take at least part off, if not all off if you did short up there (top of bear leg).<\/p>\n

Think about this for a second. Let\u2019s say a trader shorted up here (B16 close), and they took a big enough position size so that they could risk 2 points. Now let\u2019s say their stop is still up here (above B17). So now they are risking 4 points. What do they do? They have to reduce their position size. Their maximum risk on a full position is 2 points, and now their stop is 4 points away, they have to reduce their position size.<\/p>\n

\"Ask<\/a><\/p>\n

And the institutions trade that way as well. They have a maximum risk on every trade, and once it is exceeded they reduce their position size. And that\u2019s what causes pullbacks, that\u2019s why you have a strong move and then you get a pullback. It\u2019s because you have a lot of institutions with big open profits but the stop is now far away. So their risk is big and they have to get down to a position size that is appropriate for that risk.<\/p>\n

Let\u2019s say you get a little pullback, and then the bears short again on the resumption down. Well, then once you get a new low you have a new stop that is not as far as the current stop, so then you can be back to trading a full position. So whenever you get your magic number, like 4 points, double, so the stop is 4 points away, especially on a day like this where you get a lot of two-sided trading, you are going to get profit taking because the stop is up here (top of bear leg). Instead of 2 points you are now risking 4 points and you cannot trade a full size if you are now risking 4 points.<\/p>\n

You can say, \u201cWell Al it\u2019s not really my money. It\u2019s somebody else\u2019s money. I bought up here so my account size is really from over here.\u201d No, the money is in your account and as soon as it is in your account, every tick is yours. Every tick you lose is yours \u2013 it\u2019s your money. It drives me angry when I hear people who claim to be experts talk about \u201coh, you are trading other people\u2019s money with a big open profit.\u201d No, it\u2019s your money. To me it never matters where you enter. All that matters is the current price and the current price action. So it does not matter whether you shorted up here (B16\/17), you shorted there (B19), you shorted there (B20), you manage all of those trades the same.<\/p>\n

If you are scalping you have already scalped out. If you are swing trading, it does not matter if you sold right here (B21 Low). The management is still the same, if you took that trade for a swing, your swing stop is up here (above B20). If you shorted over here for a swing (below B17), your swing stop is up here (above B17). So it does not matter where you entered, your management is based upon the current price action.<\/p>\n

Al Brooks<\/em><\/p>\n

Information on Al’s Online day trading room<\/a><\/p>\n

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