Hurry Find the Band Aides!

As children we all used to enjoy putting our parents’ big shoes on our little feet and trying to walk. It was an awesomefeeling until we tried to go a bit too fast. The problem was we just weren’t big enough to handle those big shoes at high speed! I guess we all have an innate desire to grow up and get big in a hurry. I have coached/mentored many traders that act like children wearing their parents’ shoes. They try to go too fast in growing the size they are trading. They want to put on big shoes and run, leading to a trip and fall. A trading desk with good training will have controls in place to stop this, but remote traders trading their own account can seemingly raid the closet and grab any pair of shoes they find.

With this freedom of sizing and choice a typical scenario goes something like this…
The trader has a very good week trading a default size they have been trading for a little while. They are thinking to themselves wow all I have to do is trade bigger next week and I can make…   We all know the rest of the story, they double their size and proceed to trip and fall giving back last weeks gains and then some. As a child, running in shoes too big led to a skinned knee or a bump on the head, but to learning trader that fall may cause a wound that requires stitches and leaves a scar. This mental scar will hamper your progress and damage your account at the same time. Don’t be in a hurry to get too big too fast, but grow into the size. Your account and emotions have to both be ready to handle the increase in size or your probability of success is low.

This market we have been in for the past few months is not the time to be raising size. The volatility is very high and you have other options to making more money as you progress. I am seeing many outsized moves in stocks daily, how have adjusted your trading for this? Are you holding some of your position longer taking advantage of this? Trends run further than seems possible intraday, what are you doing to identify these movers early and play them?(SMB Radar)  This is a market that allows you to make more without added size maybe even smaller size to account for the added volatility.

This market has been both a challenge and learning experience to all who actively trade it, don’t make it harder by getting too big too fast.

Jeff Davis   @Shaq48_Trading [email protected] Trading Coach/Mentor

2 Comments on “Hurry Find the Band Aides!”

  1. Great parallel Jeff,

    What do you consider the correct size maximum to start-out with?
    And when should you increase the size of your trading?

  2. Ryan,
     A new trader should start with small share lots and once they can make money consistently at those sizes then raise it. They should only be risking very small amounts of capital while they learn. If a trade calls for ten cents risk maybe trade 100 or 200 to keep the dollar risk at $10-20. When you are learning it is essential to keep things small so you have a chance to learn before damaging your capital base too much.

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