Lulled into over confidence?

This week has been a good week for day trading, a little slow but that just leads to more careful trades even if they are not big movers. We were going to play SPY puts today, too bad that we didn't but we got into three other trades that were decent. Today actually was double my last four days, that makes it a good day... or more to the point, the rest of the week a small week.

Having said that the week has seen nothing but winning trades. A couple were close enough that the commissions put them a dollar or two into the red but I don't really count the commissions when judging a trade a winner or loser until the final daily and monthly tally.

Today my extra cash hit my trading account. Now it is going to remain in Canadian dollars as it is only a buffer and I really don't expect to need to use it but I do count it into the base cash to work with when running my trade size calculations. I anticipate withdrawing it in the near future so converting it is just incurring additional fees for nothing...cheaper to borrow USD against it in the remote chance that I need it for an active trade. This lets me pull trade sizes up to the $700. I mentioned the rest of the week being smaller, it was not so much due to smaller profit trades, although that was a factor, it was due to starting out with $333 trades. I miscalculated my trade sizing due to an old factor I had in one of my formulae to aim at keeping trades as a smaller percentage of my account once it got going. I didn't follow it as well as I ought to have.

$333 is almost too small to day trade options with as a 10-15% profit on the trade is only $30-$50 while commissions start at $15.40 for a single contract. Workable, but really tight. I like $700 as a minimum trade size then factor it up from there.

Seeing as one of my issues was getting trade sizing too big too fast in addition to those trades being held too long as swings I will be keeping them at $700 for a bit in order to not get too top heavy in the next batch of trades next week. I also expect that we will be placing more trades starting next week so now I want to have more trades possible to take advantage of every single trade called out.

Perhaps I should only review trade sizing each week rather than each day. That would avoid using recent profits in the new trades which might only serve to increase a loss on the next trade. Either that or keep doing it daily but increment the trade size increases. Say there is a good $500 day spread that out to the next 5 days in trade increases. That way I would gradually increase profits but also more gradually increase risk. I did far too much bouncing around with trade sizing in the past.

Hmmm.... best idea I think is to treat profits in a delayed manner. This week will be tallied up and only added to the trades in the week after next and even then roll them in incrementally while continuing to keep a percentage out of the trades in order to preserve cash in the case of a drawdown... which should be far less onerous than the last two. This serves to keep my over confidence in check as I do not just plunk winnings into the next trade and risk squandering them.

Jeff.