WhitmanTrading

Common Trading Mistakes: Size Ends Accounts

The most common trading mistakes can be ranked by damage rather than by frequency, and position size is the only one that reliably ends an account. The others cost money steadily over time, which is a different problem with a different set of fixes.

How it works

A candlestick chart of the site's shared price history. The headline on the chart reads: Size is the mistake that ends accounts.
Size is the mistake that ends accounts. Illustrative chart - not real market data.

Ranked by damage rather than by how often they appear in lists, one mistake is in a category of its own. Position size ends accounts. The rest cost money, sometimes a great deal of it, over time.

A gently rising stretch of the long price series with an account curve breaching its limit. The headline on the chart reads: Too large makes every other rule unenforceable.
Too large makes every other rule unenforceable. Illustrative chart - not real market data.

And size makes every other rule unenforceable. A position large enough to be frightening is one whose stop gets moved, whose target gets abandoned, and whose plan gets renegotiated — so oversizing does not just add risk, it disables the controls.

The exit mistakes

A declining stretch of the long price series, with the entry price and the level at which a stop would trigger drawn as horizontal lines. The headline on the chart reads: No stop means the loss is decided by the market.
No stop means the loss is decided by the market. Illustrative chart - not real market data.

Trading without a stop hands the size of the loss to the market. It works indefinitely until the one occasion it does not, and the occasion it does not is unbounded.

A flat but volatile stretch of the long price series with an account curve breaching its drawdown limit. The headline on the chart reads: Moving a stop is the same mistake, arriving later.
Moving a stop is the same mistake, arriving later. Illustrative chart - not real market data.

Moving one is the same mistake with an extra step. The position was sized against a distance that no longer applies, so the actual risk is now unknown — and the decision to widen it was made under exactly the pressure the stop existed to remove.

A declining stretch of the long price series. The headline on the chart reads: Averaging into a loser is increasing size at the worst moment.
Averaging into a loser is increasing size at the worst moment. Illustrative chart - not real market data.

Averaging down is oversizing arrived at gradually. Each addition improves the average price and increases the position, so the account’s exposure grows as the thesis weakens. It works most of the time, which is what makes it dangerous.

The quiet ones

A calmly advancing stretch of the long price series with an account curve breaching a daily limit. The headline on the chart reads: And trading too often is the quiet one.
And trading too often is the quiet one. Illustrative chart - not real market data.

Overtrading does not produce a memorable day. It removes a percentage every month through costs, and because no single trade caused it, nothing prompts an investigation.

A flat, quiet stretch of the long price series with a slowly rising equity curve beneath it. The headline on the chart reads: Not logging means the mistakes cannot be counted.
Not logging means the mistakes cannot be counted. Illustrative chart - not real market data.

Not keeping a record is the mistake that prevents fixing the others. Unrecorded, every mistake becomes a memory shaped by whether the trade worked, and the ones that worked stop being mistakes.

A strongly rising stretch of the long price series with a gradually rising equity curve beneath it. The headline on the chart reads: Switching method after a losing run restarts the sample.
Switching method after a losing run restarts the sample. Illustrative chart - not real market data.

Changing method after a losing run guarantees never finding out whether anything works. Twenty trades is not enough to distinguish an edge from noise, and switching at that point starts a new twenty. Repeat for two years and the sample is still twenty.

In practice

A candlestick chart with a volume histogram beneath it, with the volume histogram emphasised. The headline on the chart reads: Trading the hours with nobody in them is another.
Trading the hours with nobody in them is another. Illustrative chart - not real market data.

Trading thin hours is a cost mistake rather than an analysis one. Small bars, wide spreads, and a fixed round trip that consumes a much larger share of the available move.

A long-horizon candlestick view of the same price series. The headline on the chart reads: And expecting a short horizon to be easier than a long one.
And expecting a short horizon to be easier than a long one. Illustrative chart - not real market data.

Short horizons are harder, not easier. More decisions, more costs, tighter stops hit more often, and less time for an edge to express itself — while the marketing points the other way.

A candlestick series containing several opening gaps, with the largest opening gap marked. The headline on the chart reads: Holding overnight without sizing for a gap.
Holding overnight without sizing for a gap. Illustrative chart - not real market data.

Holding overnight at intraday size is a specific and avoidable error. A gap ignores the stop, so overnight positions need their own sizing decision.

A candlestick chart of the site's shared price history, annotated with the round-trip cost. The headline on the chart reads: Ignoring that every trade costs a share of a bar.
Ignoring that every trade costs a share of a bar. Illustrative chart - not real market data.

Ignoring costs is the arithmetic mistake. 2% of a median bar’s range per round trip on this history, and 45% of the smallest bar — a hurdle that exists before any question of skill.

A 72-bar candlestick section of the shared price history. The headline on the chart reads: And believing effort is rewarded by the market.
And believing effort is rewarded by the market. Illustrative chart - not real market data.

And the belief underneath several of the others is that effort is compensated. More hours, more charts, more indicators, more trades. The market pays for position and timing, and it is indifferent to how much work went into either.

Two more belong on the list and both are about time rather than money. The first is trading a market during hours you cannot actually watch it, which converts every position into an overnight one whether or not that was intended. The second is starting a method and abandoning it inside a month, which is the sample-size mistake wearing different clothes.

And there is a mistake that only appears in hindsight: succeeding by breaking a rule. A trade taken against the plan that makes money teaches the wrong lesson twice over — it rewards the behaviour and it removes the evidence, because a profitable outcome rarely gets reviewed. Grading process separately from result is the only mechanism that catches it, and it is the reason a review needs two columns rather than one.

What this list is not

It is not ordered by frequency. It is ordered by damage.

It is not exhaustive. It is the set that recurs across most accounts.

It is not a list of psychological failings. Most of them have design fixes.

And it is not a substitute for an edge. Avoiding every mistake in a method that does not work produces a slower loss.

When it fails

A sideways, range-bound candlestick series. The headline on the chart reads: In a range all of them happen at once.
In a range all of them happen at once. Illustrative chart - not real market data.

A range produces most of them simultaneously. Setups fail repeatedly, so frequency rises, stops get moved, size increases to recover, and the method gets abandoned — all in the same fortnight, all caused by a regime rather than by the trader.

The second failure is treating them as a checklist. They interact: size causes stop-moving, which causes losses, which cause revenge trading, which causes overtrading. Fixing size upstream removes several of them at once.

A third is fixing the visible ones and not the quiet ones. Nobody boasts about their commission bill, and for an active trader it is frequently the largest line.

A fourth is expecting to eliminate them. The measurable goal is a falling count, not a zero.

And a fifth is reading a list like this instead of counting your own. The general list is a starting point; your log is the version that applies to you.

The original data

On this site’s shared 576-bar history the round-trip cost is 0.0098 price units — 2% of the median bar range of 0.493 and 45% of the smallest bar of 0.022 — the 10-bar efficiency ratio has a median of 0.34 with only 30% of bars above 0.5, and bar ranges span 0.17 to 1.10 between the tenth and ninetieth percentiles. The figures are in research/series-measurements.json, produced by site/measure_series.py.

A 72-bar window of the shared price history, cut short at the decision bar. The headline on the chart reads: The position is twice planned and winning. Reduce?
The position is twice planned and winning. Reduce? Illustrative chart - not real market data.

Those three figures explain most of the list without reference to psychology. Costs are fixed and frequency is a choice; efficient conditions occur three bars in ten; and the same fixed cost is 2% of an average bar and 45% of a quiet one. A trader who sizes small, trades the active hours, and counts their trades against a plan has removed the mechanical causes of most of these mistakes — which leaves the genuinely psychological ones, and there are fewer of those than the literature suggests.

Risk per trade is the fix for the fatal one. Discipline covers the design changes behind most of the others. And why traders lose money is the wider version of this question.

What I actually do

If I could send one sentence back to myself it would be about size, not about analysis. Every account I damaged badly was damaged by a position too large, and every account that survived a bad stretch survived because the positions were small enough to be boring.

— Michael Whitman

This page is educational, not financial advice. Test every idea on your own charts before risking money.