If I could define one excuse and single reason only on why folks go astray in the trading business, it would be this. They had a position size that was too enormous for their trading account. Trade size is the number one component that makes people disappear. So what's the pill. Under bet, Under trade. You will make it bountiful. Rich folks don't pony up the farm on anything. They have gotten well-supplied over a period of time. If you bet too large, you might win a few times. But what ends up happening is that there is this loser that is brewing for you. It's out there and it's got your nickname written on it. It's there to get you. And you need to be prepared for it. That loser combined with a massive trade size puts you back many times over. You bust in a drawdown, and then most human beings are not able to pull themselves out of that.
It's not friendly when you are in a drawdown period. You get scared making trades. Every tick against you feels like forever. Unpleasant situation to be in.No wonder this business is not that easy. All these issues can be obliterated if you just don't speculate too big to begin with. If you take it plain and not speculate too huge initially, then you can keep your calm and trade judiciously when the drawdown period comes, as I know from evidence it will. Take it easy. Take puny trade sizes and then trade heavier when you know you can handle the swings that occur in your account. Most people I know are pretty satisfied with up to 10 contracts. If you can handle 10 contracts properly, you can make a lot of dough. You might be able to manage 2000 and up. More authority to you then. But make sure you can relax at night when you trade that much. I know most can't. It can give you a real hick up. I really mean it. When each and every tick against you is $32,000 and more in the bonds, it catches your mind. It catches your senses like anything.
Start small and stay small if you have to. You are not getting any medals here if you can validate you can trade bigger size. Even 10 is plenty. But from my familiarity trade size is the number one reason why people fall flat. Even winning traders have losers, but their trade size is reasonable. They can handle those loser periods. It doesn't affect them that much. I have seen people with a $5,000 account trade 5 bonds on an intraday margin. Sure, you can trade, you have enough margin bucks, but that's just cuckoo. Don't do it. Bit by bit erect your account and always have enough pillow in your account to trade through the swings. I'd say for the T-Bonds, trade 1 contract for every $15,000 in your account. It's a lucid rule, but very effective. Not need for more complex optimization for trade sizing. I know the bonds margin is about $4,000 right now but don't trade another lot till you have at least $15,000 behind every lot. You still will be flabbergasted at your payoff.
Greatest Determinant of Trading Failure