5. Think in percentages<\/strong><\/p>\nOkay so now we have determined our max daily loss.\u00a0 Great step forward.\u00a0 Let’s say it is $1,000.\u00a0 Risk a percentage of this max loss on each trade.<\/p>\n
For an A+ trade you might risk 30 percent of your max daily loss.\u00a0 So you could risk $300 on a trade.<\/p>\n
For a B trade you might risk 15 percent of your max daily loss.<\/p>\n
For a Feeler trade you might risk 5 percent of your max daily loss.<\/p>\n
Thinking in percentages helps you scale easily from here.\u00a0 With success, you continue doing exactly what you were doing, risk a percentage of\u00a0 your max daily risk on each trade.\u00a0 All you do is increase the amount you are willing to risk.<\/p>\n
6. It may take a few times to be right<\/strong><\/p>\nWhen you spot an A+ trade, it may take you a few times to catch the trade.\u00a0 You might give yourself three tries to catch the trade.\u00a0 So factor that into your risk.\u00a0 If I think it may take 3 tries to catch an A+ trade, then I will risk 10 percent on each trade, and not 30 percent.\u00a0 I want to stay in the game until I catch the trade.\u00a0 If I risk 30 percent each time, then I may get stopped out, but still see an A+ trade present.\u00a0 But since I am stopped out, I cannot take another attempt at the A+ trade.<\/p>\n
7. Size up after success<\/strong><\/p>\nAfter a significant period of success, increase your risk by 20 percent.\u00a0 Rinse and repeat, continually.<\/p>\n
8. Proof of concept<\/strong><\/p>\nWhen trying a new strategy, to expand your PlayBook, keep your risk low.\u00a0 Earn the right to take on more risk.\u00a0 Prove that you can trade the new strategy with edge.\u00a0 Keep risk to 5 percent of your max daily loss for such experimentation.<\/p>\n
9. Push yourself outside of your comfort zone<\/strong><\/p>\nYour risk should make you feel uncomfortable in your A+ trades, but not too large that a loss would set you back.\u00a0 If you are comfortable in an A+ trade, then you are not big enough.\u00a0 Not being big enough in your A+ trades, is too risky.<\/p>\n
10. Slowly and systematically increase your risk<\/strong><\/p>\nGive it time.\u00a0 We have former $4,000-a-month traders, who now are seven-figure traders.\u00a0 They have slowly and systematically increased their risk to reach their present success levels.<\/p>\n
11. Don’t be super rigid with your risk rules<\/strong><\/p>\nYour risk rules are there as a guide.\u00a0 Do not exceed your max daily risk.\u00a0 Ever!\u00a0 But, trading is a fluid activity, where plans are amended on the fly.\u00a0 Strictly adhering to risk rules, can cause you to miss a trade.\u00a0 You could be there trying to figure out the risk, while the trade passes you by.\u00a0 And there will be times where you misdiagnosis the risk on a trade.\u00a0 It is more volatile than you thought and you will lose more.\u00a0 Trying to be perfect and super rigid can make things worse.<\/p>\n
12. A+ trades will fall in your lap<\/strong><\/p>\nThe best trades just come to you.\u00a0 You observe.\u00a0 You spot a huge opportunity.\u00a0 You wait for confirmation.\u00a0 You see it.\u00a0 And then you can just pounce.\u00a0 Understanding this ought to give you the confidence not to force lesser trades.\u00a0 This ought to accentuate the importance of saving risk for the best opportunities.<\/p>\n
13. Risk changes during the trade<\/strong><\/p>\nA Feeler trade can turn into an A+ trade.\u00a0 An A+ trade can turn into a Feeler trade, if the stock is not acting well.\u00a0 Adjust your risk as you gather this new information.<\/p>\n
14. There is someone bigger and better than you so keep pushing your size responsibly<\/strong><\/p>\nAs long as liquidity allows, keep pushing yourself in your best trades.\u00a0 Recently, some traders on our desk had a six-figure day and were feeling great about their success.\u00a0 \u00a0That was until they learned that another prop trader had made over 500k during the same session, and then felt like pikers.<\/p>\n
Keep pushing!\u00a0 How good can you be?\u00a0 How big, responsibly, can you trade that setup?<\/p>\n
Below is a video of an experience trader, chatting with our new hires, on how he determines position sizing.\u00a0 I encourage you to watch and listen to this professional prop trader on sizing.<\/p>\n
*no relevant positions<\/p>\n
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