pete, having lost 400k + , seen many,many people and their systems and lost money ,, chat rooms,,,,,so pete iam at the point where i need to see results,, baby steps ,into a trading world where the winners are larger than my losers, iam looking forward to see your methodology of trading success ,thnx ,bob

There is a fundamental problem related to statistics Pete that makes what you are suggesting extremely risky…and can completely skew performance metrics…not to mention potentially subjecting ANY TRADER –pro or novice– violation of RISK TOLERANCE LEVEL acceptance…that can have serious psychological implications aside from financial implications. RANDOM DISTRIBUTION…and UNCERTAINTY IN EACH & EVERY TRADE–which trump even the highest of odds setups.

This undisputable mathematical concept will subject a trader to the risk that a much larger loss can occur despite odds being high…while at the same time including within performance winning trades that potentially have lower odds that end up with large R ratio return–yet smallest risk was put on. In the end–this will comepletely skew the most reliable performancd metric out there–EXPECTANCY. Therefore–this begs a question– Why would we risk any amount of $ in first place on low odds (B & C setups)? Instead– why not risk $ ONLY ON A+ SETUPS…OTHERWISE SIT ON HANDS? By doing this–and risking a fixed R WITHIN ONE’S ACCEPTED RISK TOLERANCE ON EACH & EVERY TRADE–we ensure odds are always in our favor–yet at same time prepared for uncertainty & random distribution as well. The only variable would be how a trade is managed to maximize potential for large multiple R return.

The net net is a system that has winners consistently outsizing losers–without the financial & emotional risk that can come from “pressing” or “going with size” (which means much larger loss if wrong).

Pete–all it takes is a few bad trades that were A+ to go bad to have catastrophic results that many may not be able to overcome. I welcone constructive rebuttal–but this argument is very difficult to overcome–because math & statistics do not lie. To understimate their affects sets one up for disaster…so why should we ever go there in first place? Taleb & black swans come to mind?

From a devil’s advocate standpoint–it may come to mind–“Why not just ensure that risk tolerance is still covered when going in with size when appropriate…that way–if wrong…one will still be within acceptable $ loss?” Problem is–this again means by definition u will be throwing less $ at LOWER ODDS TRADES—yet we should only be trading when odds are om our side….so therefore they CANT POSSIBLY BE IN OUR FAVOR IF WE ARE NOT WILLING TO TRADE OUR MAX RISK TOLERANCE LOSS PER TRADE! Vegas does not take a single bet with odds not in their favor–NEVER. So why should we?

Instead–depending on market conditions–while our $ risk is always static–how we manage trade will determine our potential return odds (ie wide stop trail if long in strong market w/ sector wind & no supply/resistance in sight in stock or SPY in strong relative strength equity…which indicate high odds for follow thru & large R multiple return… or tight trail or limit out/book profits when long & stock and/or market hit supply and/or deteriorating conditions/weakness etc set in…which would indicate low follow thru odds & therefore lower R multiple expectations as examples). These are all things that we NEVER know until in the trade (ie –now we have more information which adds or subtracts our odds that existed at entry)therefore we dynamically adjust as needed–again–all the while ALWAYS WITHIN MAX RISK TOLERANCE.

Pete–as u can see Im passionate lol–u were a great inspiration to me at T3…many of my principles/rules/strategies are byproducts of some element of wisdom or nugget u conveyed. THANK YOU 🙂

I have been actively trading for 3 years so far. I did great mistakes, the conclusion of those mistakes was putting trades that bigger than my account size.
However, leverage is good tool to use it only under the size of your account, and in many different trades that has higher probabilistic. On other words, implement many small trades so if it lost the other winners would make it up.
I used my leverge in future trades like /CL , so mini which were way bigger than my account size and of course I got margin call. Since than I learn the big lesson in tradeing in small size trade that if I lost won’t impact the size of my account and do many of those trade, only when you see the high probability pattern.
keep your trade small, and don’t get fool by the leverage, keep it very small like you going to put 100 of them all depends on your comfort with the size of the trade, be ready to lose it all and still able to countiunue the journy because you will lose some.

Hi everyone

My question was indeed asked in the context of a black swan event.

But Pete’s example of Real Estate enlightened me on the subject of trading mastery. A master trader never worries for going bankrupt in such an event because he knows (and his lenders too) that he can rise like a phoenix from its ashes, like Jesse Livermore did several times in his life (excuse me if I seem pompous). Pete gave me an important clue to the answer I was searching for, namely that the greatest (whom we should strive to become) don’t worry for big losses independent from their will, because they hold the key to unlock the riches at any moment. Now let’s get to work lol.

I think it’s fine to pyramid into winning trades. There’s no question that this involves more risk but you have to make a decision on why/what you are trading for. At some point in time most hugely successful traders have blown up their own account, someone else’s account – or both. I have found that no matter what you are trading, at some point the “stars” line up and you gotta go big.