I've been going over and over this issue in my head for months.

I'm a swing trader. I had a rough stretch between December-February. Because of financial duress, I began trading position sizes well beyond my comfort zone. I dug myself a sizable hole ($24,000 i.e. 8%). I took a break for a couple of months, got my head right, and then got back to basics in my sizing. Since then I have shaved off nearly 2/3rd's of my losses.

My issue now is how much risk to have on at any one time in terms of total positions while trading from a deficit. As I get closer to breaking even I get a little more gun shy to handle more than one trade at a time.

- My positions typically run me anywhere between 50 to 150 ticks worth of risk.
- I trade 1,000 shares with stocks priced between 10 and 50. Anything up to the $70 range I'm using only 700 shares.

My feelings have always been that when I'm ahead and in the green with "house money" I can begin to expand the amount of risk I put on ..... but until then it's better to be pragmatic. I become conflicted about it whenever I consider the inherent random distribution of wins/losses in any method or system.

Any recommendations on this?

You need to focus on working in terms of percentages instead of '# of shares' or actual dollar amounts.

Check the spreadsheet and thread here on Risk of Ruin:

Risk of Ruin I'd like to start a discussion on Risk of Ruin. The general concept of a Risk of Ruin analysis is to determine if you will go bust over a statistical number of trades. For example you may have a probability edge of 65% but after factoring commissions, …

Mike

I calculate my risk as a percentage of my trading capital.
Position size is determined by where my stops are placed.

I would be pretty sure that the idea of expanding risk when playing with the "house money" is something straight from the casinos to make sure you don't leave with the house money.

Of course you should increase your bet size when winning and decrease when losing for optimal growth but "playing with the house money" is disassociating yourself from the bets you are making for no reason.

Your risk isn't a 150 ticks though, your risk is streaks of losing a 150 ticks per loss.

There is a ton of wisdom in something like scaling in 3rds. While it is easy to come up with better betting systems in games with stable risk and win rates like blackjack it is tough to do much better in trading IMO.

Consider also there is no rule that you can't add additional money from other sources to bring your trading account back in the black and bring your bet sizing back to what it was.

NoiseTrader716 

I would be pretty sure that the idea of expanding risk when playing with the "house money" is something straight from the casinos to make sure you don't leave with the house money. Of course you should increase your bet size when winning and decrease when losing for optimal growth but "playing with the house money" is disassociating yourself from the bets you are making for no reason. Your risk isn't a 150 ticks though, your risk is streaks of losing a 150 ticks per loss. There is a ton of wisdom in something like scaling in 3rds. While it is easy to come up with better betting systems in games with stable risk and win rates like blackjack it is tough to do much better in trading IMO. Consider also there is no rule that you can't add additional money from other sources to bring your trading account back in the black and bring your bet sizing back to what it was.

In my defense I didn't say "playing" with house money. That implies irresponsible trading and I don't "play" around when it comes to this stuff. I'm more cautious than curious. I've just always thought that if you're going to increase risk, not only should you do it when you're more confident but also when you're well enough ahead in your account. It's mentally easier than when you're trading from behind. Just like if you were up in a trade and moved your stop to breakeven.

As for the risk, I wasn't implying I only have 150 ticks of risk out there. I was trying to give people an idea of what I'm looking at on a trade per trade basis. One of the ways I've been I've looking at it is I've recouped just over $14k so how much of that do I want to risk right now as I get closer to break even?

Can't add funds to the account though. The person who bestowed upon me the capital is monitoring my performance.