Why Traders Fail when they Increase their Trading Size ?

By | July 13, 2021

For the retail trader, learning to scale up your position size can be a nerve-wracking process that can lead to unexpected and outsized losses.

How big a position you should take in the market usually is governed by the amount of money in your account. It seems that when you trade a small number, things go right. No matter what you do, you are a winner. Money rolls in. Your account swells.

Many people are not content to have their accounts roll up the dough. They will always want to accelerate the process of money accumulation. They reason that if they traded a certain size, all they have to do is increase that number, and they will increase their earning power.


Somehow, it just doesnít work that way. When we increase the size of our positions, a funny thing happens. We usually begin to lose money. And a lot of it. It all depends on how you increase your size.

Weight lifters gradually put more iron on the bar. They don’t suddenly go from one hundred to three hundred pounds. They go in small increments.

Our minds are very much like muscles. They can handle only a gradual increase in the risk that we assume in the market. Too sudden a shift in risk size disturbs our equilibrium and sense of the marketís ebbs and flows.

Most of Traders reach a number that we can’t seem to exceed. We can be successful at one level but not at a higher one.

  • Why is it that this phenomenon of size occurs?

  • What makes it difficult to trade large numbers and continue to be successful?

  • What magical power takes over when weíve increased our risk and sense of adventure?

  • Knowing that this law of size increase results in a disaster, why can’t we restrain ourselves and live with this truth?

  • What keeps us returning to retest this great law?

Our egos insistence that this won’t happen again seems to overpower our judgment. It canít believe that it isnít ready to be a bigger trader.Our sense of self is enhanced by size, be it in trading large numbers, living in a big house, driving a big car, or owning a big boat. Our egos swell in proportion to the bigness of our risk assumption.

Egos want to be bloated, and one way is to trade bigger than we are capable of doing successfully. Egos often will deny the reality of their inability to function at a higher risk level. They will tell us that they have it under control this time and that they are strong enough to do well at a greater trading size.

The pain of being wrong seems to increase exponentially in relation to the size of the position. If we normally trade one lots and now we are trading twos, the degree of difficulty in acting quickly when we are wrong is not twice but perhaps five times as great.

Herein lies the magic that seems to cast its spell on each trader’s psyche. The pain to our ego is in proportion to the size of trades. Avoidance of pain is what keeps us from acting fast. Losing that fear is the key to success. We musttrust the process.

Very few people have problems taking profits. The ability to take losses quickly is what separates the great market players from the also-rans. It is also what separates us from our money. This ability is a function of the ego’s willingness to admit that it is wrong. The person with the smallest ego can take losses quickly. Also, the smaller position usually results in a smaller loss. The smaller the amount of pain the ego has to work through, the less time it will take to get it out of the way.

There is a paralysis that sets in when the losses begin to mount. These losses are much too much for the ego to admit. It would rather deny and postpone judgment day than face the truth.

The greater the size, the greater the pain when we are on the wrong side of the flow of the market. Itís easier to swallow our medicine when the pills are small than when they are big.

In Our Psychological and Performance Coaching We discuss on challenges traders face and how to overcome them.

Trading is a journey so don’t expect instant success overnight. Take your time and learn as much as you can with each trade. Trading is one of the purest forms of meritocracy and is inline with being a professional athlete. Your performance is how you are graded and if you aren’t continually push yourself then you will never make it to the professional level.

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