The advice "Reduce your position size to suppress your emotions" is...
Yumi🌸@samuraipips358
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Apr 18, 2025
~3 min read
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1
The advice "Reduce your position size to suppress your emotions" is wrong🧵
Position size is a critical part of strategy.
It is not something to be determined based on emotions.
↓Thread 1/5
Position size is a critical part of strategy.
It is not something to be determined based on emotions.
↓Thread 1/5
2
2/5
"If you are scared, reduce your position size" is often said, but this view is wrong.
I want to put an end to this wrong copy-and-paste advice that keeps being posted.
Why is this view wrong?
The reasons are simple.
・Determining position size "based on emotions".
・Remaining stuck in the viewpoint that "losing is bad".
・Position size is an extremely important aspect of strategy, yet it is being neglected.
You must change the premise that losing is bad.
Do not console yourself "afterwards" that a loss is a cost; make it function as a true cost that was "calculated beforehand".
And it is precisely because "you understand it truly functions as a cost, are convinced of it, and are utilizing that cost" that emotions which deny it cease to appear.
The logical sequence is important.
It is not that you change position size to suppress emotions; rather, your associated emotions change precisely because you mathematically understand the necessary position size.
Wrong: Emotions → Change in Position Size
Correct: Calculate cost per trade based on strategy performance → Calculate position size that allows safely collecting samples long-term with 0% risk of ruin → Emotions that match that
"If you are scared, reduce your position size" is often said, but this view is wrong.
I want to put an end to this wrong copy-and-paste advice that keeps being posted.
Why is this view wrong?
The reasons are simple.
・Determining position size "based on emotions".
・Remaining stuck in the viewpoint that "losing is bad".
・Position size is an extremely important aspect of strategy, yet it is being neglected.
You must change the premise that losing is bad.
Do not console yourself "afterwards" that a loss is a cost; make it function as a true cost that was "calculated beforehand".
And it is precisely because "you understand it truly functions as a cost, are convinced of it, and are utilizing that cost" that emotions which deny it cease to appear.
The logical sequence is important.
It is not that you change position size to suppress emotions; rather, your associated emotions change precisely because you mathematically understand the necessary position size.
Wrong: Emotions → Change in Position Size
Correct: Calculate cost per trade based on strategy performance → Calculate position size that allows safely collecting samples long-term with 0% risk of ruin → Emotions that match that
3
3/5
For losses to function as costs in the true sense, it must be clear—based on a large sample size—what amount of profit you aim for at what probability for each loss.
Through a large sample size, the position size is determined that, based on the strategy's performance, enables you to safely build a large sample size over the long term.
When you trade this way, you are making losses function as costs.
You understand from a long-term framework how losses lead to profit.
Your stance shifts to one of proactively utilizing losses, rather than seeing them as something to be avoided or endured.
For losses to function as costs in the true sense, it must be clear—based on a large sample size—what amount of profit you aim for at what probability for each loss.
Through a large sample size, the position size is determined that, based on the strategy's performance, enables you to safely build a large sample size over the long term.
When you trade this way, you are making losses function as costs.
You understand from a long-term framework how losses lead to profit.
Your stance shifts to one of proactively utilizing losses, rather than seeing them as something to be avoided or endured.
4
4/5
Position size is not something to be increased or decreased to match your emotions.
Making it smaller because you are scared, or larger because you are brave, is completely wrong.
The seemingly safe advice "If you are scared, reduce your position size" is dangerous precisely because it affirms "adjusting position size based on emotions."
Your decision-making must not be emotional.
In the first place, the very reason you set a position size that frightens you was likely because it was chosen out of the desire for "how much I want to earn," wasn't it?
You were mistaken from the very starting point.
Do not let your emotions determine important decisions in trading.
Rather, let your correct decision-making generate the appropriate emotions.
Do not get this order wrong.
What scares you is not the position size itself; the cause lies in your fundamental lack of understanding.
・Thinking of trading as a win-lose game.
・Assigning meaning to the result of a single trade.
・Having a shallow understanding of extracting the edge by letting probabilities work through a large sample size.
・Based on that understanding, not grasping the long-term, safe, and appropriate risk in your trading.
Position size is not something to be increased or decreased to match your emotions.
Making it smaller because you are scared, or larger because you are brave, is completely wrong.
The seemingly safe advice "If you are scared, reduce your position size" is dangerous precisely because it affirms "adjusting position size based on emotions."
Your decision-making must not be emotional.
In the first place, the very reason you set a position size that frightens you was likely because it was chosen out of the desire for "how much I want to earn," wasn't it?
You were mistaken from the very starting point.
Do not let your emotions determine important decisions in trading.
Rather, let your correct decision-making generate the appropriate emotions.
Do not get this order wrong.
What scares you is not the position size itself; the cause lies in your fundamental lack of understanding.
・Thinking of trading as a win-lose game.
・Assigning meaning to the result of a single trade.
・Having a shallow understanding of extracting the edge by letting probabilities work through a large sample size.
・Based on that understanding, not grasping the long-term, safe, and appropriate risk in your trading.
5
5/5
The advice, "If you are scared, let's reduce the position size," merely reveals that the originator of that statement does not understand the essence of the problem.
Reducing position size because you are scared, or increasing it because you are brave, is emotion-driven decision-making itself.
Your decision-making must be logical and capable of remaining consistent.
If you have appropriate understanding and cognition, and an approach to trading rooted in that, you accept the risk you are taking for the targeted profit and probability on the premise of building a large sample size.
Therefore, you are not adopting reckless position sizes in the first place, nor are you even afraid of a single trade.
Thanks for reading!
If you enjoyed this thread, check out my books on trading.
【THE PATH TO SUCCESS IN TRADING】
E-book:payhip.com/b/H1ZBo
Paperback:a.co/d/fXmRhIa
【Trading Psychology】
E-book:payhip.com/b/SNnJC
Paperback:a.co/d/d0QJMxK
Hope these insights help your trading journey 😊
The advice, "If you are scared, let's reduce the position size," merely reveals that the originator of that statement does not understand the essence of the problem.
Reducing position size because you are scared, or increasing it because you are brave, is emotion-driven decision-making itself.
Your decision-making must be logical and capable of remaining consistent.
If you have appropriate understanding and cognition, and an approach to trading rooted in that, you accept the risk you are taking for the targeted profit and probability on the premise of building a large sample size.
Therefore, you are not adopting reckless position sizes in the first place, nor are you even afraid of a single trade.
Thanks for reading!
If you enjoyed this thread, check out my books on trading.
【THE PATH TO SUCCESS IN TRADING】
E-book:payhip.com/b/H1ZBo
Paperback:a.co/d/fXmRhIa
【Trading Psychology】
E-book:payhip.com/b/SNnJC
Paperback:a.co/d/d0QJMxK
Hope these insights help your trading journey 😊