When green P&L leads to sizing up too fast
Posted: Tue Oct 20, 2026 8:46 pm
A strong week, or a strong month, and the natural thought is: the strategy is working, time to increase size. Sometimes that's right. Often it's too fast.
Problems with sizing up after wins:
- Recent wins may be partly luck. Variance works in both directions.
- Larger size changes how trades feel. Execution and decisions can deteriorate.
- A drawdown at the new size hits harder.
A more measured approach:
- Increase size only after a predefined number of trades (e.g. 100) with stable metrics.
- Increase in small steps, e.g. 20–25% at a time.
- Review after each step: did execution change?
- Have a rule to step back down after a drawdown of a set size.
Another approach: link size to account equity in a formula (fixed fractional), so size grows automatically and gradually as the account grows.
Avoid: doubling size after a great week.
How do you decide when to increase size?
Problems with sizing up after wins:
- Recent wins may be partly luck. Variance works in both directions.
- Larger size changes how trades feel. Execution and decisions can deteriorate.
- A drawdown at the new size hits harder.
A more measured approach:
- Increase size only after a predefined number of trades (e.g. 100) with stable metrics.
- Increase in small steps, e.g. 20–25% at a time.
- Review after each step: did execution change?
- Have a rule to step back down after a drawdown of a set size.
Another approach: link size to account equity in a formula (fixed fractional), so size grows automatically and gradually as the account grows.
Avoid: doubling size after a great week.
How do you decide when to increase size?