Big Dog started to learn Futures to capitalize on this market with elevated volatility.  He is a fast study.  Big Dog is also an accomplished trader, in the 500k-1m a-year range.  Let me share an anecdote working with him on our desk to improve his sizing.

Big Dog noticed something about his stops when he started to size up in this new product.  He was getting wicked out.  (He even went as far as wondering if the algos knew where his stops were and running them intentionally.)  He explained:

When I trade 2 times bigger, I usually want to be in the money right
away, and try to avoid getting into fake breakouts, and want to be in
cleaner breaks, so my stops tend to be tighter, as a results, stops tend
to get triggered more often.
When I trade 1/2
bigger, I tend to give wider stops, and let things wiggle a little bit
more and evaluate my situation more. I’m willing to take the chance of
getting into fake breakouts because even if I get stopped out further,
it wouldn’t be as devastating as I were to trade it with 2 times size.

Big Dog was searching for my advice.

So I responded:

Either get better at seeing when the trade will work right away or trade
1/2 size and every 3 days positive increase size 20 percent.

Big Dog chose the later.

Three days later he followed up.

Following up on my PnL after cutting my size back 50%.  (Big Dog then shared his PnL, which compliance instructed me to remove.  But Big Dog went back to making money consistently.)

Next week I will add 500 shares to equities and 1 contract to futures.

I’m
really thankful that we confronted this problem together and found a
solution that worked timely. I think partly what happened earlier was
that I kept thinking about wanting to make huge money by adding a lot
of size. But what’s really more important to me are making good trading
decisions, keeping my trading edge, and maintaining consistency.  My PnL
should be a result of doing these things religiously. And sizing should
be done in a way that doesn’t alter my trading behavior.

These are the issues and real-life exchanges with which accomplished traders struggle.  It is not just you.  Notice how Big Dog diligently reviewed his trading to find a solution and then found one.  Sometimes we must take a step back in trading to progress.

Related posts

Sizing your positions with increased volatility

SMBU trading lesson of the week- Position sizing

The overlooked risk tool- position sizing

*no relevant positions

Mike Bellafiore is the Co-Founder of SMB Capital and SMBU, which provides trading education in stocks, and options. He is the author of One Good Trade and The PlayBook.