# When do you increase your bet size?



## Gringotts Bank (15 November 2013)

Discretionary traders in particular, when do you increase bet size?  What are your determining factors? Increasing size on a winning streak makes perfect sense, but what other ways might one use?

System traders have very tricky ways of sizing up when the algo tells them to (eg. winning streaks, losing streaks).  Please add your thoughts if you system trade.


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## tech/a (15 November 2013)

Personally

I look for little tiny micro consolidation patterns 
and place my pyramid above that by 2 ticks.
Do that for Stock as well as index futures.

If your using live data even for stocks quite often a sub 10c stock can be making a run and you can really belt it!
Just make sure your timeframe is large enough not to swing you around in noise. Some cant be avoided but you really need lots of liquidity---millions---most runners trade millions of shares as they spike.

Same can be done for longer timeframes
Daily and weekly.

Another is a strong Pivot reversal bar back in the direction of my trade.


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## skc (15 November 2013)

Do you mean increasing bet size on the same trade, as in pyrmiding? Or increasing bet size on the next trade?

Tech/a has answered the first bit.

On the second notion - an increase in bet size along the growth of your capital seems like a pretty reasonable thing to do. I used to do that on 5% steps.


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## pavilion103 (15 November 2013)

Tech with the pyramiding I have a question.

If it is a stock with a tight consolidation that you would add to, do you take the same risk on that position e.g. 1% or do you make it say, 0.5% (half the initial risk on the trade).

Obviously with futures the micro setup means less points risk because positioning is fixed at say $10 per point rather than fixed fractional.


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## Gringotts Bank (15 November 2013)

I mean, say for a discretionary trader, before entering, what would make you risk 1% as opposed to 2% (as an example).  Or would you only pyramid/build into a position once you're in it?

For a system trader, what conditions would make your system take a bigger position, other than the liquidity of the stock?


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## CanOz (15 November 2013)

Bellafiore talks about increasing size as a percent of the day stop. Even so far as going "all in" on your best of the best 'A' plays. 

For example, if one of your plays is something you see frequently that works better then 50% of the time then you may want to consider sizing up for it.

If you see one of your plays that works almost every time you take it, then maybe consider risking up to all of your daily stop on it.


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## Gringotts Bank (15 November 2013)

So to summarize everyone's answers:

*If already in trade:* look for smaller patterns/candles on shorter time frames which are in the direction of your trade and build the position as they appear.

*If EOD trading:* have a fixed % position size which will automatically increase bet size as your total equity increases.

*If day-trdaing with a daily stop:*, go bigger when your past history with this particular set up has a high chance of winning...even up to risking your daily stop on one trade.

Thanks all.

Anyone on systems trading?


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## CanOz (15 November 2013)

Well in systems trading one of the easiest ways to scale up as your account equity is growing is sizing as a % of it. That's the compounding effect.


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## pavilion103 (15 November 2013)

CanOz said:


> Bellafiore talks about increasing size as a percent of the day stop. Even so far as going "all in" on your best of the best 'A' plays.
> 
> For example, if one of your plays is something you see frequently that works better then 50% of the time then you may want to consider sizing up for it.
> 
> If you see one of your plays that works almost every time you take it, then maybe consider risking up to all of your daily stop on it.




This appeals to me.


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## cynic (15 November 2013)

My systems include specific criteria for increasing and decreasing exposure to the instrument/s traded. The triggers for  these incremental/decremental changes are based on either time or market activity.

The incremental/decremental size/s is/are predetermined, at the outset, via consideration of available trading capital and the relevant system's historical performance. The system is then deployed.

There is also one other trigger (panic button) that produces an excremental change. When that occurs (usually a black swan FTSEing with one of my Geese) the deployment is abandoned and all residual exposure is promptly dumped.


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## howardbandy (15 November 2013)

Greetings --

Position sizing depends on how well the system is performing.  System performance changes as the characteristics of the data change.  We want the maximum position size that is consistent with both probable future drawdown and our own personal risk tolerance.  When the recent results are risky, the position size should be low (or even zero -- this method will take the system offline before a catastrophic loss of trading equity) when the system is performing well  -- with a win ratio that is high and losses that are small -- position size can be safely increased.  The model -- logic, rules, and parameters -- cannot determine risk.  That is best done in a separate operation using Bayesian techniques based on recent performance.  You can get an outline of my thoughts in Chapter 2 of my book "Mean Reversion Trading Systems," which is a free download from the book's website:
http://www.meanreversiontradingsystems.com/book.html
Click on the link to Chapter 2.  You will be getting a pdf file.
Note the flowchart on the page numbered 39.  After each trade, update the trade result data, reassess risk, determine position size, estimate profit potential, and decide whether the system is worth trading.

The concept, which I call "dynamic position sizing," is explained in more detail in my next book, "Quantitative Technical Analysis," expected to be available in six months or so.  The book describes specifics of the technique and includes background and justification, formulas, procedures, charts, test results, and some rules-of-thumb.  

Best regards,
Howard


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