Size DOES Matter

Kiki and I read Dr Brett Steenbarger's blog every Sunday as it deals with a lot of the "head" issues of trading. One of the most misunderstood things that impacts traders' heads, is trading too large a size for their emotional capabilities at that point in time.

One of the first things that I did when I started teaching Kiki, was to make sure that she had saved enough money to trade. In her case it was the equivalent of $10,000 US, to trade 3 contracts. Probably twice as much money as she really needed. For other markets like the YM it may be a little lower . How much you need in your account depends on your ability to "not care" if you lose it and for it to be large enough to carry you through the inevitable draw downs (losses) when you start. But it's important not to feel squeezed because you are under capitalised.

Its very important to start live trading with the least number of contracts that your methodology allows. It's 3 contracts in our case. When you start SIM trading, you should also only use that same minimum number size.

I usually say that you can go from 3 contracts to 6 contracts after you have made $5,000. Kiki is ahead of that target but is still trading 3 contracts,as that is what she is comfortable with. Some of us thrive on pushing ourselves, others need to go with the flow. Kiki surprised me when she told me that she still only wants to trade 3 contracts.  She tells me this even though she has learned her setups, validated her methodology, experienced risking real money and has lost the initial stress she felt when she switched to real money after months of SIM.  She thinks of the money she has made trading as her money not the market's money and doesn't want to give back any that she has made. I believe that you cannot become consistently profitable unless you reach this stage of relaxed trading, Kiki has, but there still must be some "head game", going on that I don't know about or she won't tell me about. It will be interesting to see when she decides to go from 3 to 6 contracts.

There has been great interest in the webinar. I love the great countdown clock Kiki put on at the top right hand corner of the blog. We will record the webinar for those that miss it.

Today's trade in the ES was relaxed as usual. We caught one very good trade and the others were average. There is probably more money to be made today but I'm tired, even after taking my usual nap.

 

Click chart to enlarge