I received this email over the weekend from Reader David, a developing trader, improving daily:

Hey Bella!

How bout’ this market! Just so much opportunity, and great setups that
I am seeing everyday. Today that trade was ABIO over 5. I got long 2
lots on the break and added above 5.50, sold out near the highs and
waited for a pullback to get involved again. After that I had a few
nice .25-.40c scalps off of the 5.20 level. This hotstreak I have been
on has been quite remarkable, I can count the # of losing days in the
past few months on 1 hand. Now I have a question. Is there such thing
as having too much buying power? I have built up a nice bank roll,
with my year to date profits …….. I have been increasing my
size on the A setups and getting good results. I am trying to stay in
this groove that i’ve been in. I realized yesterday that I might
actually have too much buying power, which could potentially tempt me
to take too much risk. I got short 1k AMZN at 142, and covered around
140 – yes it was a great trade but I had no business taking that
amount of size. This is what I like to call a “good problem” to have.
Do you have any thoughts on this? Thanks in advance, have a great
weekend and enjoy the beautiful weather!

Bella Responds:

When we make an A trade we risk 30-40 percent of our intraday stop loss limit.  So if our intraday stop out is $1000, then we will risk $300-$400 on an A trade.  You might develop a system for how much risk you take on your A trades.  Consider creating mandatory risk for your A trades.  Most developing traders do not have enough risk on with their A trades.  Also you must define your risk correctly.

Check out GMan’s video on risk to our desk for a further explanation.

So do not focus on the buying power consumed.  Focus on your risk.

I hope that helps.

Bella