When Trading, Size Really Does Matter

I’ve talked a lot in the past about position size, specifically the benefits of trading with larger orders.

But trading is all about adaptability and recognizing when it’s time to switch things up. This is one of those times.

The market has been very choppy for me of late. I’ll have a red day one day, and a green day the next. That’s not the type of consistency I’m looking for. So something I tried doing this week is experimenting with my size. Specifically, cutting it down.

I know that may seem counterintuitive. The greater your position size, the greater the profit. You need money to make money.

That’s true. But in times of uncertainty it’s best to be cautious. And while the market may be certain for some, it hasn’t been for me of late. So instead of trading with my usual position size of 15-20,000 share orders, I’m trading with a quarter of that.

Yes, 5,000 shares. I did this to lower my risk and protect myself. With the kinds of profits I’ve been making lately, small scalps on stocks like Cool Holdings IFON, a larger size would eat away at any gains.

This is due to slippage. Slippage occurs when there’s a difference between the price you placed the trade at and the price your actually gets filled at. If I’m only making $500 on a trade (as an example) I can’t really afford to give up that much. An increase of $0.03 on a 20,000 share order is $600. That’d wipe out my entire profit.

Smaller positions help you avoid this, especially if you’re trading volatile stocks like the ones I do. I’m going to maintain this size until I can build back some momentum and book some gains, and I’ll only increase once I feel confident in my ability to read the market again and make consistent profits in my trades.