You've been trading well. Consistent profits. Good discipline. Your account is growing steadily.
Now the question: when do you increase your position size?
This is one of the most dangerous moments in a trader's journey. Size up too fast and you can erase months of gains in days. Size up too slow and you leave significant profits on the table.
Here's how to navigate this transition without blowing up.
The Wrong Reasons to Size Up
First, let's eliminate the bad motivations:
"I feel confident." Confidence often peaks right before disaster. Feeling good is not a reason to risk more.
"I'm on a winning streak." Streaks end. Often right after you size up. Recency bias makes recent wins feel like skill when they might be luck.
"I need to make more money." Need-based sizing leads to emotional decisions. Trade based on what the market offers, not what your bills require.
"I'm bored with small gains." Boredom is not a trading signal. If $200 profits bore you, you have a psychology problem, not a sizing problem.
"This setup is perfect." Every blown account has a "perfect setup" that wasn't. The setup that feels perfect is often where overconfidence kills you.
The Right Reasons to Size Up
These are legitimate reasons to increase position size:
Your account has grown. If you risk 1% per trade and your account goes from $10,000 to $15,000, your per-trade risk naturally increases from $100 to $150. This is just maintaining consistent percentage risk.
You have statistical proof of edge. After 100+ trades, your expectancy is clearly positive. Not "I feel like I'm profitable" - actual numbers that prove it.
Your process is consistent. You're following your rules on 90%+ of trades. You're not gambling, hoping, or improvising. The system is working and you're executing it.
Drawdowns are manageable. Your worst drawdown is within your psychological tolerance. If you sized up 50%, could you handle 50% larger drawdowns?
The Gradual Approach
Avoid doubling your size. The psychological impact is too large. Instead, scale gradually:
The 25% rule: Increase size by no more than 25% at a time. If you're trading 1 contract, go to 1.25 (round as needed). If you're risking $100 per trade, go to $125.
Earn each increase: Require proof before each bump. For example: "After 20 profitable trades at this size, I'll increase by 25%."
Time buffer: Avoid sizing up during winning streaks. Wait for a normal period - some wins, some losses - to ensure you're not just riding luck.
Keep records: Track your psychology at each size level. Some traders perform identically at any size. Others fall apart when the numbers get "real."
The Psychological Barrier
Here's what nobody warns you about: larger size changes everything psychologically.
When you risked $50 per trade, a loss was nothing. At $500 per trade, the same percentage loss hits differently. Your account is fine - you followed the rules - but your brain screams that you just lost $500.
This psychological impact causes real problems:
- Cutting winners early (fear of giving back gains)
- Moving stops to breakeven too soon
- Hesitating on valid entries
- Overtrading to "make back" losses
The solution is gradual exposure. Let each size level become boring before moving to the next. When $500 losses feel like the old $50 losses felt, you're ready for $600.
Account Milestones
Some traders use account milestones as sizing triggers:
Simple approach: Recalculate position size at each 25% account growth. Start with $10,000 risking 1% ($100). At $12,500, risk becomes $125. At $15,625, risk becomes $156.
Conservative approach: Only increase after new equity highs that have held for 30 days. This ensures you're not sizing up in a lucky spike.
Aggressive approach: Recalculate risk daily based on current equity. This compounds fastest but also accelerates drawdowns.
Most traders do best with the simple or conservative approach. The aggressive approach requires exceptional discipline that few have.
When to Size Down
Just as important as knowing when to size up is knowing when to size down:
After drawdowns: If your account drops 15-20%, reduce size. You need to protect remaining capital, and your psychology is likely compromised.
During market changes: If your strategy stops working - maybe volatility changed, maybe correlations shifted - reduce size while you figure out what's happening.
During personal stress: Major life events affect trading. During divorce, illness, job loss - trade smaller or not at all.
After big wins: Counterintuitively, this is when many traders blow up. They feel invincible and size up aggressively. Consider sizing down after exceptional streaks until psychology normalizes.
The Danger of Averaging Up
There's a difference between sizing up your strategy and sizing up in a trade.
Good: After 6 months of consistent 1-contract trading, moving to 1.25 contracts per trade.
Dangerous: Adding to a winning position because it's working. This can work but requires specific rules and discipline most traders lack.
If you're going to add to winners, have explicit rules: where you'll add, how much, and where the combined stop is. Improvising in the moment tends to backfire.
A Sizing Framework
Here's a practical framework for scaling up:
Phase 1: Prove it works
- Trade minimum size for 50-100 trades
- Focus purely on execution, not profits
- Document everything
Phase 2: Build consistency
- Trade at 50% of your target size
- Require 3 months of profitability
- Track rule adherence (aim for 90%+)
Phase 3: Scale gradually
- Increase by 25% after each month of profitability
- Pause increases after any losing month
- Reduce size after 15% drawdowns
Phase 4: Maintain
- Recalculate base size quarterly
- Stay under 2% risk per trade regardless of confidence
- Continue tracking and adjusting
The Bottom Line
Sizing up is where trading accounts are made or broken. Do it too fast and you destroy months of progress. Do it recklessly based on feelings and you're gambling, not trading.
Size up gradually. Size up based on proof, not feelings. Size down when conditions warrant. And always remember: the goal isn't maximum size. It's maximum risk-adjusted returns over time.
Stay humble. The market doesn't care how confident you feel.
Quality scoring systems can inform sizing decisions objectively. If a screener rates a setup 4/5 based on cycle phase, HTF alignment, and volume confirmation, that's different from a setup scoring 2/5. Data-driven sizing removes the emotional component: full size on high-quality setups, reduced size on marginal ones.
Pentarch's IGN phase (markup after accumulation) is structurally different from its CAP phase (climax exhaustion). Augury Grid's quality scores quantify which setups warrant full size versus reduced exposure. Data replaces gut feel.
See cycle phases and quality scores →