Episode 255: Is It Possible to Get Too Big?

by robbooker on May 19, 2014

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In Episode 255 of The Traders Podcast, your host Rob Booker starts off by discussing hypocrisy. Next Rob talks about AT&T’s plans to acquire DirecTV in a $48 billion merger. Then Rob’s little boy, Isaac, makes an impromptu, surprise appearance on the show. And Rob concludes with a discussion about whether it’s possible to get too big. Thanks for listening to The Traders Podcast. We’re glad you’ve joined us.

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Rob Booker.com

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{ 2 comments… read them below or add one }

ryan hit buy instead of sell today May 20, 2014 at 10:22 pm

Optional question for mailbag…
It would be awesome to have traderspodcast 5 days a week with co-hosts.
Moday-strategies.
Tuesdays-psychology.
Wednesdays-lifestyle.
Thursdays-news.
Friday-traders questions answered.

Or something like that.

Just my 2 cents worth. Have a flabuous day! Actually that wasnt in the form of a question. Sorry alex, ill take implied volatility for $200

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Brian F. May 27, 2014 at 12:13 pm

Is it possible to get too big? Absolutely. A lot of traders I’ve listened to report that they top out in position sizing because their psyche can’t handle a larger sum of money.

I think improper position sizing lies at the heart of a lot of trader problems. Everybody want’s to get rich fast. But, when our position is too large, we can’t think in terms of the big picture and end up doing something stupid, like taking small winners, holding losers, doing anything spontaneous, or trying to get your money back WHEN YOU ARE LOSING (a personal pet peeve, why trade when you are losing?).

One of the biggest obstacles for successful trading is to view each trade as individually unimportant, a single outcome in a large series. It’s in our biology to value single events. We have one baby at a time. We encounter obstacles in the primate world, like a crocodile, one at a time. Lose one encounter with a crock, it’s all over. Not so with trading. Individual trades don’t matter. However, sizing too large MAKES the trade important, and then all those bad habits come flooding in. That shouldn’t happen when your account is larger, a larger position size shouldn’t affect your trading if it’s mathematically appropriate, but that’s the primate mind for ya!

You have two options:

1) You can become an expert on trading psychology, and try to virtually ooze discipline all day long, but a lot of better traders than you or I have tried and failed. Sooner or later you will slip up, revert to type, and erase hundreds of hours of work. This is the message I attempted to impart to Scott, that defense is more important than offense because a poor defense is at work 24 hours a day undermining your progress. Further, a large position size lies at the heart of a bad defense. My bad, he probably didn’t appreciate the point because I was being “spicy” and “infamous” (LOL).

2) Alternatively, you can approach the markets with humility, accept that you are flawed because you are human, and avoid the whole issue by not going there. Keep your sizing small and the psychology books on the shelf. Accept that the fastest way to get rich is to get rich slow. There it is. We all have this preconception that we can get rich quick trading, however that which is obtained fast is usually taken away fast. If one is not convinced, look at the guests on this show. How many years did John Carter have under his belt before he landed that big currency trade? Find me a SINGLE successful trader who got rich quick AND HELD ONTO THE MONEY. Position sizing isn’t just one aspect of trading, it’s everything, the central pillar to handling liquidity problems, volatility, drawdowns, process, and most of all, psychology.

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