I received an email from a new trader asking for input on whether to increase his max tier size (how many shares he can trade per position). To get bumped up a trader might reach out to a Senior Trader to receive the increase. This is a trader who does everything asked of him. This is his 6th live week of trading. He started as a new trader. Here are my observations:
1) Notice how his best days are equal to his worst days. This is not optimal. You want your best days to be 2xs your worst.
2. Notice how many days he has very close or at his stop for this stage of his trading career. He is close to being stopped out on 1/3 of his trading days. Not more than 1/5 are the numbers of most consistently profitable traders.
3. He should hit $300 at his current tier size before he should worry about aggressively increasing his tier size.
4. His last week is excellent for his young career. This is what I expect from this trader.
5. I am very confident this young trader will become a very successful trader. He works at his game. He is getting better everyday. His skill are advanced for just 6 weeks into the game.
6. Would you bump up this trader?
13 Comments on “Should we increase the tier size for this trader?”
If he could give you two more consistent weeks to make up for his two inconsistent ones, then he gets the bump.
I would’t. Trader is not yet comfortable at this tier level, why would one rush? He/She is clearly getting better, I would hold off for few week until I see clear consistency. One good trade and then one good trade and only then a tier increase.
Agree with assessment above, specially # 1 best days = to worst days
It’s a marathon, not a sprint. I remember when I first started and I was in a rush to be making big money and was always pushing for more buying power. I think that’s a relatively good quality to have in a trader if they are doing well (it’s harder to get people who are generally uncomfortable with risk to properly manage increased size), but it’s up to the risk manager to keep that person from getting too aggressive too soon. I would say if the trader puts up another week like the one he just had then it’s time to give him that bump, but overconfidence is a clear danger if he’s asking for a bump after one good week following two net negative weeks.
It’s difficult to determine a new traders real ability just based on calculating the outcome of a few trading weeks. A new trader may make good money on weeks that the market/stocks are directional but rip it up when it’s not so easy. more information is needed to determine whether the profits made were from good trading or lucky trading; proper risk management, sound reasoning, fundamentals, etc and only his mentor can truly determine his ability to handle more size as a result. From the look of the results only, the one good week doesn’t say much and consistency in the outcome of the weeks will speak volumes to the traders true ability to trade and the likelihood of being able to handle more size.
I’m not sure that P/L should be used as measurement of performance. If you ask Dr. Steenbarger or Dr.
Menaker they would strongly disagree with this.
Stepping from one size to the next can cause quite a few problems. Last week your trader made $400 and
imagine next week with increase size he lose $600, that can be devastating for him.
Personally I would not increase size at least until I see few weeks of constant performance, and then decide. If trader for example will trade next 10 years 3-4 weeks will make no difference in his life.
nah this trader is definitely not ready to go, he only had one good week so far
I think he would have to deal with a lot more of unecessary pressure
I think you need more info to evaluate the traders performance… I can’t adjust the TIER based on 3 weeks of trading. Everyone wants to climb the ladder very fast, but i would wait 3 months before i can raise him.
At this point, he should still be in “training mode” and concerned more with becoming better each day and less with tier size. There will be plenty of time for that once he’s consistently profitable.
I would not, because
1) if he will become a great trader in the future, money will come soon enough
2) Upside is that he perhaps makes 800 bucks next week instead of 400. It doesn’t make any difference.
3) Downside is that he has a bad streak and loses confidence. This happened to me when I got bumped up too early in my career several years ago.
I also have to ask, if this is his 6th week of live trading, why do we only see 3 weeks of trading data?
some really nice responses from readers of the blog on this issue. i hope all of our most recent trainees are reading these comments and taking them to heart.
they are the results from this month. he finished positive in his first month.
What I commonly see is that people do well for a short period of time, receive some new capital, and for whatever reason, lose their original discipline and the high-low P&L range widens, along with wider emotional swings for a brand new trader. I would personally observe the trader to see if he has the emotional discipline to continue doing what he does for another 1-2 weeks, give him a chance at an additional increase if he earns it after that period, but let him know that he may be cut back down if he is an “at-risk” person. Goal now should really be to learn the ropes, not to make money. Money will come later, but he should prove more 1) consistency and 2) profitability, and he’ll automatically show that he’s ready for additional responsibility (more cap).