Do Good Traders Vary Bet Size?
In Alpha Trader and The Art of Currency Trading, there is detailed discussion of how to vary bet size according to market volatility, and according to conviction level. Varying bet size according to volatility is not controversial. If the S&P is moving 5%/day, you need to trade smaller than when it’s trading 1%/day. And it also stands to reason that if you are extremely confident on a trade, you should invest more in that idea than a trade where your confidence is just 6 out of 10. But maybe that’s wrong! The reason that could be wrong is that the idea is only sensible if there is a known, positive ... (full story)