Arch 

You need a good strategy, obviously, but having a large account trading smaller size (or just micro) helps you stay in the game and recover losses. I'm not saying to rely on letting loser run and return back to profit as a consistent strategy, but trading too large relative to account is what wipes out people, in my opinion

Arch
You are right the position sizing is the factor which contributes the most to wipe out your account no matter how big or small account size it is.

we retail traders spend more time, almost 99%, on finding some good indicators
for technical analysis to rationalize our entry/exit decisions and neglect the risk management altogether.

I guarantee any retail trader no matter how good analyst he is and no matter how good set of tools he has will never be consistently profitable until he has a good risk management strategy.

In my view risk management solves most of hurdles towards consistency and in that case account size becomes immaterial.

For example if you have a $5K account and Taking say 5% risk per trade with 1:1 risk reward you will wipe out your account in 20 consecutive losers.

To be profitable you need at least more than 51% win rate in above scenario.

Now If your account size is 100k and still taking 5% risk with 1:1 risk reward strategy, still you will wipe out your account in 20 consecutive losers.

To be profitable you need at least more than 51% win rate in this scenario as well.

So consistency and profitability is nothing to do with account size but with risk management.

I wrote a detailed post #61 about risk Management in indicators a waste of time
thread. That clarifies risk management in detail.

Human life to sustain needs all food items except water(30%) and water(70%).

In Trading life risk management is water and rest all is other food items. If someone can survive without water I would like to Know the miraculous secret.

To be consistent and profitable please devise a good risk management strategy and follow it mechanically.

Rest all, sooner or later, is a recipe to disaster.

If stop losses and discipline (adhering to strategies) bothers us we should not be in trading business at all. For such people long term investing would be the best option.

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.