Home > Lessons from the trading floor > proper share size is the key to day trading profits

proper share size is the key to day trading profits

Proper share size is the key to consistent profits Every good trader I have ever traded with had a monitor outlined with Post-It pads at the beginning of their career. There are simply too many things to remember for a newbie. The goals is to have all of those pieces of the decision making process eventually become second nature so one by one the Post-It’s will come off the monitor.

The two that I think are the most important are getting the sequence correct for developing a trade scenario (read my BLOG post here about this) and the other is having the right shares at the right time. Everyone knows the cliche or trading rule never average down, I can tell you from experience that averaging down (adding to a losing position after you have the amount of shares you planned to have before the trade) is the fastest path out of the business. Think about what you are telling yourself, “hey this trade stinks, its not working out, lets get more.”

I can tell you from my experience the advent of Supermontage (NASDAQ) and especially Hybrid trading on the NYSE it is much harder these days to trade out of a bad position. There are so many buy/sell programs that kick in these days that a flood of money hits the market at these levels and if you are wrong, you are wrong by a mile! This is why we never suggest anyone add to a losing trade.

Your goal as a trader should be to have the most shares when you have a profitable trade and the least shares when the trade is not working out. It is the perfect math equation. There are two big things you must firmly believe to make this work though. It is going to be common for you to take quite a few small losses and small profits until 3-4 times per week a trade will follow through and you will be able to add to it as it confirms your trade scenario. These 3-4 trades will pay your bills.

You must be diligent cutting small losses and never adding to a position until it confirms your idea. The math does not work if you are allowing yourself to take losses as big as your largest gains. The exciting thing about this key part of the trading process is that it is completely under your control. No matter what happens in the market you have control over how many shares and when you go get them.

When you truly understand and believe this simple but powerful concept your risk management will be stress free and your profits will skyrocket when a few good scenarios follow through! Start applying this on your next trade and you will be living large.


  1. No comments yet.
  1. No trackbacks yet.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: