Heck, I even trade the spot market now with my Momentum trade set ups. For spot I just use the CD of the uptick/downtick of trades (with no CD of volume info) as my mechanism to track the trade rate activity……works perfect in spot.

Most traders use a % per trade risk…

However…

I’ve found that % risk per time period has made a difference for me and as the account grows I add to the contracts traded and the % of equity I risk.

because…

Early on I sat through many losing trades waiting for the % stop to get hit as I ostensibly “let the trade work.”

It didn’t help that in 2002, I didn’t have a real methodology and only a vague understanding of supply and demand in the micro time frame, but I bought hook line and sinker into Van Tharp’s psychology coaching and position sizing concept and ended up “paper-cut” bleeding my account 1% at a time.

Having a market view and understanding how to gauge supply and demand allowed me to then gauge my risk dynamically per day so I wasn’t married to the hard stop on each trade…I would find that I was often correct in my understanding of turns in the market but needed flexibility in entering the trade so I scaled into with a max of three levels with a % per day risk.

‘Scaling in’ is also known as “working the trade” and it’s not a magic bullet for bad trading. It can also be known as losing your a$$ or blowing out an account by adding to a loser.

However this approach reined in by a % per day forced me to watch my criteria as opposed to hyper-focusing on nailing the perfect setup and slapping on a two point stop or % per trade stop and then feeling a false sense of security as though I were following good practices.

When I had a useful marketview (like worldview) based on data driven supply and demand (i.e. a positive expectancy) that led next to tweaking on how to best risk in the market and then those together greatly reduced my anxiety and discomfort around trading thus buoying my psychology.

Psychology and position sizing without a real methodology is akin hyping yourself up at an Amway rally. All the NLP, hypnosis, law of attraction rah rah psychology leads to grief with no payout for time and money spent.

BTW It’s not a slam of Van Tharp. I own his course and position sizing videos and it’s not that position sizing and Pyschology aren’t important. It’s that they’re useful in supporting a solid methodology.

This video (7min) below puts an even further twist on how to manage a position dynamically around a % per time risk..

To your trading success,

Fulcrum Focus