Trading sizing...beating a dead horse?

Position sizing seems to take up most of my thoughts about trading of late. Likely this is due to the potential profits related to larger position sizing, it is tempting to just bump them up across the board.

Seeing as I have three active plans going right now it makes the most sense to split the trading capital up to allow for each to had at least minimum workable trade sizes.

Day trading: This is fixed due to the TFSA account being funded to the current maximum allowed under the CRA rules. Due to loses from last year I was down over $3,000. Add the allowable contribution room for this year of $5,000 and I started out at $6,700... or so. I am now up to $9,500 so running three contract trades allows 12 concurrent trades based on my current $2.62 per contract average price so far. Most days I will not see that many trades but it allows for carrying some overnight and holding the next day. It also keeps losers to a smaller percentage of the account as I cannot add to this account until January.

I will bump up to 4 contracts once I hit the 15 concurrent trade level, near $12,000 account size. This allows 11 trades at 4 contracts...anything over ten is good.

Momentum options: I feel that at least 15 possible concurrent trades should be the minimum here. Given the average prices are $2.05 that should mean $615 trades. That is probably low as there were some trades that I missed that were higher priced... so I'll use the same $2.62 as in the day trading. Trade sizes are $786. 15 trades would use up about $12,000.

Stock trades: Seeing as I can use margin here I can triple the account size to determine my trading sizes. This is also the least profitable plan as it, so far, involves only trading long the stocks themselves. Prices vary greatly but I wanted to use 100 shares as a minimum position size. The most expensive stock so far has been in the $40 range. If I subtract the cash allowance for the momentum options trades ($12,000) that leaves about $10,000 cash for stocks, or $30,000 margin. Using the average price of all stock trades thus far ($17 approximately) I could place 17 x 100 share trades altogether. I figure that some of the less than $10 stocks could use 200 shares and some of the $30 plus stocks might be OK with 50 shares.

Using a 15% stop loss on these stock trades leaves me with an average per trade loss allowance of $255. Seeing as I move these stops with the prices as they rise (which worked in my favour last week) I can easily accommodate this even considering the margin applied.

Enough weekend ramblings for now.

I am looking forward to some more profitable trading this week and I plan on seeing 4 contract day trades into the following week. I think that I will leave the maximum at 5 once I get there only to manage possible losses over the long run. Get the account growing, keep the cashflow at a nice consistent level then consider when to move to 6 or more contracts afterwards.

Jeff.