How do you plan upscaling your acc

General
1

Say, you have hit something which just is too good. Consistently getting returns.

Don’t tell me to backtest. It’s a gut feel trading so backtest isn’t that essential.

Anyway, coming to that, how have you ever scale up ?

Please spare basics like, i am running in luck streak, i need to backtest 10 years data.

Considering that I can hit 2R in almost every trade.

Let me worry abt drawdowns or accuracy or anything.

Just share how have you sized up your account, if you have.

2

As you know am an option trader. First I determined the capital required for 1 lot and then traded. When my profit got up to that much capital I increased to two lots. The process goes on.

So for me it is per lot equity that matters. As my equity grows I increase my position size. I typically upscale at the start of a new financial year using the profit after tax from last FY and keep a constant position size throught out that FY.

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3

I only trade Options now - both buy side and sell side.

I suppose you are asking about directional trading, so I’ll tell you how I have approached and scaled Option Buying.

  1. Allocate small capital initially. Keep the total Capital for option buying very small - like 2.5 lac, even if you have 2-3 cr capital.

  2. Only buy ITM/ATM options. Start with 1 lot to get a hang of how options move. You are almost guaranteed to lose money in this stage. So staying very small is prudent.

  3. After you have become profitable and understood nuances, move to 20% of allocated capital per trade ie 50k. It is a small amount, but remember Option buying is a high ROI game if you do it right.

  4. As the capital builds with profits, your per trade value goes up.

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4

2.5L is position size for option buying? is your position size this big for option buying?

5

what made you shift from equities?
just wanted to know

6

Total capital allocation specifically for Option buying right at the beginning. Per trade allocation should be 20% of it.

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7
  1. ROI is great with Options. You can blend in short options and long options to generate relatively predictable income.
  2. Ability to Trade index with leverage. Small movements and big profits (and losses too ofcourse). And with Short options, you can make money even when nothing happens.
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8

I’ve allocated 10% to trading size, maybe I should scale more

since my personality is risk aversive, it’s hard to calm nerves

9

That’s fine. Especially until you are profitable and get over the initial drawdown phase.

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10

Premature of me to think like this, but nevertheless intriguing and alluring, the way you had put it.

11

As with everything related to trading, the answer is: it depends on the trader’s psychological and emotional makeup.

But instead of leaving it at that, let’s walkthru the factors that come into play:

  1. Unit size:
    Let’s say your trading capital deployed is 1L for a 1L unit cost. Scaling up doesn’t even come into the picture unless you reach 2-3L.

But for the sake of continuing the discussion, let’s say the unit size is 10K and your trading capital deployed is 1L.

  1. Incremental increase and periodicity:
    I would recommend an initial increment of 25% of profilts accumulated per week. So, in this example, you would increment your deployed capital to 1.1L, when you reach 1.4L.
    Daily increments are too frequent, and will lead to data-entry errors when placing trades.
    25% is a good starting point, which you will then increase/decrease/maintain, depending on whether:

    a. If you start feeling anxious, due to which your trading style changes, while the trade is on.
    For eg. if you were trading your initial size, you wouldn’t bat an eyelid when the trade went against you (not reaching your stop level yet), but with increased size, you start feeling anxious and are tempted to take the loss and run… Increased size made you change your trading plan. Then, reduce size.
    This is especially true for you @Celina, since you have a discretionary trading style.

    b. If you start feeling bad about giving back too many gains, after a string of losses, because the losses are bigger.
    For eg. it took you 2 weeks to reach this level of profit, and you reverted back the that level within a week… You might regret increasing size, since if you hadn’t, you would still be positive… Mind plays funny tricks on you. In my experience, the funny thing is that you will face some losses immediately after raising size, no matter your win-streak till that point - see if you can power through it.
    c. If you start feeling bad about leaving too much on the table… increase your allocation of profits. Don’t do this too soon, I would advise. Go through a few cycles at 25%, face a few drawdowns too, and then decide. But if you’re comfortable, definitely go for it.

  2. Better than me rambling on, there is a book on this that I have referred to in my “favourite books” post here. It explores various strategies to increasing size in layman’s terms, without all the advanced math you normally see in portfolio management books.

Whatever you do, be comfortable, and quickly amend size till you get to your “sleeping point”. Changing your mind is OK, being more aggressive or less aggressive is OK… it doesn’t define your personality, it’s just that you need more time getting comfortable with size.

Best of luck.

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