Position Sizing and Trading Bigger: How to Maximize Profits When Day Trading Stocks.

As traders, we hit a certain stage where we want to get to the next level. Now, in order to get to the next level and make more money, we have to take on more size. We have to take bigger positions. Now, doing so is not an easy task. I understand that and I know a lot of people go through that struggle of being able to effectively size up, effectively take bigger positions and not really hurt their account and not really panic out of trades. So. So in this video, I'm going to break down how to effectively size up and build up a higher cushion and build up your trading leverage where you're able to take on bigger trades and not really get scared out.

Now, typically, most of the time when we increase our position size, a few things that happen is we tend to lose money, way more money than we anticipated or our trading starts taking a hit. So, so for example, let me break it down, right? So let's say you're starting out and typically you're risking about $400 per trade or you're buying, let's say 10 contracts or 10 shares, right? That's what you're typically trading or typically what you're going towards, right? In order to increase your position, let's say in order for you to go from 10 contracts to maybe 15, or from $400 max loss to 600, or for you to make, let's say on average $800 to $1,200, you want to increase it to 3,000, right? In order to do this, once again, you need to increase your position size. You need a larger position, right? You need to make a bigger investment and allow yourself to a bigger loss to achieve that. Now to do that, I like to call something where it's like the staircase effect. Now there's a whole understanding component that goes behind this, right? The first thing that I want you guys to understand and I'll break down like how to go about it is you can't increase your position overnight, right? So for example, let's say right now you trade 100 shares of Apple, right? And your max loss is $300 per trade, right? You can't wake up tomorrow and say my max loss is 300. My max, not max, but let's say average gain is 6 to 800. You can't wake up tomorrow and say, you know what, I want to increase my max gain to $2,000 or I want to increase my position size from 100 shares to 300 shares overnight. And this is what most people do. They literally go from this position to a higher position. In one trade, and typically what tends to happen is the moment they increase their position size, their trade goes against them and they have a big drawdown on their account. Now, the reason for this is, guys, when you take on a bigger position, you're not used to it, right? More emotions step in the way. As more emotions step in the way, and this psychologically throws you off. Now, typically, there's nothing wrong with the trade. Most of the time, it's just all in your head. Because of this big position, it's affecting you a lot more. So, for example, let's say with Apple, let's say you buy Apple at $110 and it goes down to 109.

So let's say, for example, right, we break down Apple. Let's say when you trade Apple, you're buying Apple on average at $100, right? Now, with 100 shares, if the stock goes from $100 to $99, you're down $100. Now, typically, you're used to that. Since you're used to that, that drawdown is not affecting you or not causing you to panic. But the moment you size up and you buy 300 shares at $100 and the stock makes the same move down. Now, instead of you seeing your typical $100 down P&L, you see $300, and that scares you a lot more because you've immediately increased your size. So the way to go about this, guys, you want to focus on the staircase effect, where if you're trading 100 shares and your max loss is, let's say, $300 per trade, right? You don't wanna immediately go up 100% because that's gonna throw you off your game. You wanna slowly increase and say, you know what? Let me go from 100 to 120 shares. And let's say instead of losing $300 max, let me go to, I don't know, 360. Just throwing out a number. Now you're slowly increasing size. Now, this allows you to stay in the game longer and not really get shaken out. Now, once you stay at that level, you kind of flatten it out. And then you increase size. You flatten it out. You increase size. And what do I mean by flattening it out? I mean, when you increase your position size to 120 shares or $360 per trade, you now keep it at that for some time before you increase it again. Increase it again, increase it again, increase it again. That's the first thing. The second thing I want you to keep in mind Is position sizing, right? If you want to effectively position size, you need to know when to position size. When is the right time to position size? Like you can't wake up every day and say, today I'm going to size up, today I'm going to size down. No, it depends on the trade. It depends on how you feel about the trade. It depends on your consistency, right? So. So for example, let's say you've had six red days, right? Six red days where you're in a rut, you're unable to get yourself out of it. This is not a time to size up. This is a time to size down. This is where you want to reduce risk. You wanna figure out why you're in a trading red. You wanna figure out how to fix it, how can you get back at it. And then when you find that consistency again, that's when you want to slowly increase your position size. What a lot of people do is on times like this, they increase their position size, they go more aggressive, they become way more aggressive and that leads to a bigger drawdown on their account, right? So let's just recap one more time just to make sure everyone's on the same page. To effectively increase your position, you have to make sure you look at it from a staircase effect where you slowly build up your position. That's number one. Number two is you need to know when to increase your position and when to decrease your position size. Because not every position you're gonna take and say, my max loss needs to be $300, right? That's not the focus. This is what my average max loss should be based on my account size. But this is a very high probability trade. I've been on a consistent win streak. I have the trading capital and I have the cushion to take this trade with a little bit more size. And I'm more confident in this trade so I can increase my position size and take on a bigger position. Or you know what? My trading hasn't been the great, it hasn't been the best. I haven't been trading so great. So you know what? I like this play. Don't love it. It's great. It looks like a good setup. I am going to decrease my position size. These are things that you need to know when to be aggressive and when to be defensive and understand that. And that's how position sizing is going to help you. And once again, remember, day by day, staircase effect, where you slowly start building your position, does not happen overnight. And if you try to do it overnight, your P and L guys. And this is not good, right? You're. Your P L is gonna look like that. We don't want your P and L to look like that. We want your P and L to look healthy. And the way to have a healthy P L looks something like this. You go up, you have drawdowns, you go up, you have drawdowns, sometimes consolidation and then sometimes you see some nice little pushes on the upside, right? But you don't want to see your P and L where you see something where your account goes up and then one big drawdown just brings your account down. That is not good risk management. So once again, position sizing is going to help you really achieve that. And to have the proper position sizing, you need to size up accordingly. So when you see the opportunities to size up, take the size. And if there's no opportunity to size up or no opportunity to trade at all, learn to sit on your hands. If you guys have any questions, please follow my Instagram. I'm going to post my Instagram right here. DM me. I'll be answering any trading related questions at all there. Once again, if you like the video, please give it a thumbs up and subscribe to this channel and I'll see you next time. Thank you.