ursus 

That's pretty much what I was trying to say. In addition, trading smaller size - relative to the account size - results in smaller drawdowns in dollar terms and therefore is psychologically easier.

I'm not sure I follow that logic.

Regardless of the account size a $1000 loss is a $1000 loss. On a percentage basis of the account size the percent drawdown will be smaller but you are still out 1000 bucks.

Most new traders want an increased account size so that they can sit thru what they hope will be a temporary drawdown, this allows them to risk more and will eventually lead to a big loss.

Rather than increasing their account size they should be adjusting their entry criteria and taking less risk.

deaddog 

I'm not sure I follow that logic. Regardless of the account size a $1000 loss is a $1000 loss. On a percentage basis of the account size the percent drawdown will be smaller but you are still out 1000 bucks. Most new traders want an increased account size so that they can sit thru what they hope will be a temporary drawdown, this allows them to risk more and will eventually lead to a big loss. Rather than increasing their account size they should be adjusting their entry criteria and taking less risk.

Perfect
This is what most of the retail traders Ignore.

deaddog 

I'm not sure I follow that logic. Regardless of the account size a $1000 loss is a $1000 loss. On a percentage basis of the account size the percent drawdown will be smaller but you are still out 1000 bucks. Most new traders want an increased account size so that they can sit thru what they hope will be a temporary drawdown, this allows them to risk more and will eventually lead to a big loss. Rather than increasing their account size they should be adjusting their entry criteria and taking less risk.

Yes, exactly.

And also...

Psychologically, it's easier for a trader to hope the drawdown is temporary and will recover, than to cut loss and reenter when more favorable. What I am suggesting is to accept that humans have flawed psychology yet still be consistently profitable, which is possible. You just need:

- big account
- correct position sizing (trade small relative to account)
- follow your "best" strategy, ignore noise and don't take entries that don't match your setup
- know your exit criteria and loss criteria
- don't be afraid to take risk

even after doing all that, you will inevitably make mistakes for whatever reason. And you will let a loss get bigger than it should. All I'm saying is accept that and follow the 5 above for damage control.

the last one is counter intuitive, but I have over-leveraged countless times on VERY GOOD SETUPS successfully, 100% margin of account size (not including profit) which you will think is insane. I take and wire out profits consistently, which means I come out on top, so psychologically, the "money" in my account is just drypowder that keeps on growing and I'm not afraid of some of it burning during the growing process because I have already taken profits out.

After all my experience, I will share this also which works for me, might not work for you.

Trade less and better setups.
Trade bigger.

Arch 

What I am suggesting is to accept that humans have flawed psychology yet still be consistently profitable, which is possible. You just need: - big account - correct position sizing (trade small relative to account) - follow your "best" strategy, ignore noise and don't take entries that don't match your setup - know your exit criteria and loss criteria - don't be afraid to take risk

Again I question the value of a big account.
If you are trading small relative to account size then your performance will be small relative to account size.
If you follow points 3, 4 & 5 with disciple you will make the same profit dollar wise.

Arch 

After all my experience, I will share this also which works for me, might not work for you. Trade less and better setups. Trade bigger.

Every one is unique with unique skills but few things are universal.
Universal truths work for every one and without any exceptions.
what deaddog is talking about is those universal truths.

bavan666 

I have seen many posts of guys who have dedicated 5-10+ years of their lives trading and still are not profitable despite all their efforts. I guess some would even agree that had they taken some other path towards success they would be in a much better state in life. What I've heard from other traders is that the '95% of traders' who are not profitable don't have the required technical knowledge, don't have any proper money management rules, and let their emotions get in the way. I'd say traders who have many years of experience aren't lacking in the knowledge department, would have learned the importance of money management as well after all this time, and after trading for so many years, they probably would have become desensitized to the thrill/fear of making/losing money. So why aren't these people profitable then? What are they missing? What else is required aside from market knowledge, money management, and emotional discipline?

Try the book "The Unlucky Investor's Guide To Options Trading" by Julia Spina.

deaddog 

I'm not sure I follow that logic. Regardless of the account size a $1000 loss is a $1000 loss. On a percentage basis of the account size the percent drawdown will be smaller but you are still out 1000 bucks. Most new traders want an increased account size so that they can sit thru what they hope will be a temporary drawdown, this allows them to risk more and will eventually lead to a big loss. Rather than increasing their account size they should be adjusting their entry criteria and taking less risk.

Some replies after my post sort of addressed this point.

Is it easier to make $1000 a month from trading a 10k or 100k capital? Ten percent a month will require more risk tolerance than one percent. There is also a psychological context of a relative utility. Even though a thousand bucks is a thousand bucks, losing one percent of capital is psychologically easier than ten. The corollary - the trader is less likely to fuck up the rules and go crazy with the size.

Even though a thousand bucks is a thousand bucks, losing 1k brings asymmetrically more pain than the amount of joy of winning the same amount.

Of course, dammit, a profitable strategy is the starting point.

Actually, it just dawned on me that trading is, in a way, similar to weight loss. Losing weight is simple: consume fewer calories than you expend, and in a few weeks you will shed kilos (or pounds, for our American brothers and sisters). However, only about 20 - 25% of dieters are successful in the long term, be it low carb, low fat, low anything, vegan, carnivore, keto or anything else. And just like in trading, there a literally thousands of diet advisors (mentors) on every corner of the Internet. So while the basic principle is pretty straightforward, there is an issue of appetite control, which is multifactorial and, as the result, is very hard to manage.

Compare it with trading, where there are numerous simple strategies, yet only a small percentage of traders are consistently profitable.

ursus 

Compare it with trading, where there are numerous simple strategies, yet only a small percentage of traders are consistently profitable.

Eat less + exercise more = Wieght loss
Cut losses + let winners run = Profitable trading.

ursus 

Of course, dammit, a profitable strategy is the starting point.

Of course! plus the discipline to follow your strategy.