EA Craftsman's EA Course 【020】 Timing to Increase Position Size with Compound Interest

Appropriate Position Size

Even in discretionary trading, when your operating capital grows to some extent, you may wonder whether to increase your position size.

From my experience in stocks and futures, I have been doing discretionary trading for nearly 30 years, and I have studied and chased the question of the appropriate position size in depth, including reading research papers on probability and statistics.

However, as many of you may have experienced, theory and reality differ.

I studied physics in college, and no matter how much theory you learn, unless you perform experiments based on it, it has no meaning.

I think the same goes for chemistry and medicine; you can become overly theoretical and end up with abstract concepts that stay on the desk.



In other words, even if you determine the ideal position size using high-level mathematics, it is meaningless if the trader cannot endure it.

By the way, currently for example in USD/JPY discretionary trading I trade around 100,000 to 300,000 units, but in my younger days I have traded as much as 1 million units.

The reason I reduced position size was "because it was exhausting."

Perhaps due to aging, but I believe there is a position size that allows me to perform at my best.

If the size is too small, there is no tension and trading becomes sloppy; if it is too large, the pressure can lead you to do things that deviate from the original plan.

When money isn’t at stake, you may think, "let's follow this plan," but when unrealized gains or losses fluctuate, you may change your mind and alter the plan.

One of the causes could be the position size.

beginners who are stronger than professionals

And the same goes for automated trading.

Discretionary trading as well, beginners tend to push for quick profits and use reckless sizes.

Even professional traders and full-time traders can use surprisingly large sizes. They are fearless, so to speak.


Except for self-proclaimed charismatic traders who appear in the media or psychopathic traders under money pressure, even professional traders do not earn as much as beginners think.

You may have heard stories of charismatic traders who made a lot of money and then lost a lot or went bankrupt; that means people who earn a lot take on corresponding risks.

And at some point they may go bankrupt... and they trade with that mindset.

If you cannot do that, if you reject confronting risk or high-risk/high-return, then you should keep the position size modest, I think.

Compound Growth with Auto-Trading

Taking all of these into account, if you want to run compounding growth with automated trading and raise the position size, the semi-automatic trading concept explained in the sixth EA course will be helpful.

For how to implement semi-automatic trading, please refer to the sixth course and earlier articles; at the time of reactivation, the idea is to raise the position size.

In other words, during drawdown.

What?! Raise the position size during a drawdown?!

This is very counterintuitive and scary. That is why it has an edge. It goes against the instincts of beginners and amateurs.


As you may have noticed, to achieve compounding growth with this method it is a prerequisite to be somewhat proficient with semi-automatic trading.

Operate the EA with small lots while practicing semi-automatic trading, and become proficient at handling it.

Also, there are EAs in the world that include compounding within them, but they are very dangerous and not recommended.

As mentioned earlier, an appropriate position size is not the theoretically optimal size for the method or EA, but a size that is comfortable for the trader.

Even with automated trading, a large lot size can make you fearful after a little drawdown, causing you to stop using the system before the edge can manifest.

Conversely, if the size is too small, like discretionary trading, semi-automatic trading tends to become sloppy.

Considering those balances, and from the maximum drawdown and recommended margin discussed in previous EA courses, the position size should bedecided by yourself.

■ My Developed EA Concept and Operating Policy

EA Craftsman's EA (Three Arrows) is here