Biggest Source of Trading Defeat
If I could diagnose one ground and single excuse only on why folks fall flat in the trading avocation, it would be this. They had a position size that was too enormous for their trading account. Trade size is the number one factor that makes human beings disappear. So what’s the pill. Under bet, Under trade. You will make it bountiful. Rich folks don’t bet the farm on anything. They have gotten rich over a period of period. If you bet too large, you might win a few times. But what ends up happening is that there is this loser that is in store for you. It’s out there and it’s got your pet name written on it. It’s there to get you. And you need to be prepared for it. That loser combined with a gigantic trade size puts you back many times over. You go in a drawdown, and then most people are not able to pull themselves out of that. It’s not pleasant when you are in a drawdown period. You get scared making trades. Every tick against you feels like forever. Brutal situation to be in.
Hard business too. All these problems can be demolished if you just don’t set too enormous to begin with. If you take it simple and not toss up too large originally, then you can keep your calm and trade sensibly when the drawdown period comes, as I know from knowledge it will. Take it easy. Take baby trade sizes and then trade extra when you know you can handle the swings that occur in your account. Most folks I know are pretty happy with up to 10 contracts. If you can handle 10 contracts properly, you can make a lot of chips. You might be able to handle 2000 and up. More authority to you then. But make sure you can relax at nighttime when you trade that much. I know most can’t. It can give you a real hick up. I really mean it. When each and every tick against you is $32,000 and more in the bonds, it catches your concentration. It catches your senses like anything.
Start puny and stay small if you have to. You are not getting any medals here if you can certify you can trade bigger size. Even 10 is enough. But from my familiarity trade size is the number one underpinning why people fall flat. Even winning traders have losers, but their trade size is maintainable. They can handle those loser periods. It doesn’t affect them that much. I have seen folks with a $5,000 account trade 5 bonds on an intraday margin. Sure, you can trade, you have sufficient margin money, but that’s just idiotic. Don’t do it. Haltingly fabricate your account and always have enough cushion in your account to trade through the swings. I’d say for the bonds, trade 1 contract for every $15,000 in your account. It’s a simple rule, but very practical. Not need for more difficult to understand optimization for trade sizing. I know the bonds margin is about $4,000 right now but don’t trade another lot till you have at least $15,000 behind every lot. You still will be stunned at your outcome.
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