The Prop Trader's Chronicles: Short-Term Proprietary Trading Strategies for Both Bull and Bear Markets

LAYERED POSITION SIZING

One of the most limiting aspects of trading for a beginner is the lack of flexibility of position sizing. Whether your maximum per-trade size is dictated by your own money management rules or the rules of a proprietary trading firm, the smaller your maximum size the less flexibility you have to scale into and out of your trades. This is especially true in some cases such as futures contracts, where a single contract may be proportionately large to a beginner trader's account and psychological status. However, as you develop as a trader, scaling up is a major part of progressing; being creative with how you scale into and out of your trades will be a contributing factor to your performance, as well.

Depending on the nature of your strategy, the idea of a single entry and a single exit can either be slightly inefficient or outright idiotic. With some types of strategies such as pair trades, the ability to scale in and out of positions is more a matter of liquidity limitations (in some cases) and making use of opportunity. For other strategies such as scalping on stocks that move with a very choppy personality on a typical trading day, splitting up your entries and exits into smaller orders makes a lot of sense simply because it's unlikely that the stock will stand in place for long and there's a lot more room to take extra profits by scaling in and out rather than making a flat single-entry single-exit bet.