On Scaling Up
Procedures and Pitfalls of Proper Position Sizing
A trading system rarely breaks at small size — it breaks when exposure increases. Scaling up exposes weaknesses you didn’t know you had. Performance alone doesn’t make or break a trader.
Position size does.
Position sizing is the most important part of any system because it is through position sizing that you will meet your objectives or meet ruin.
— Van K. Tharp, Trade Your Way to Financial Freedom (p. 91)
Tharp’s point is direct.
Position sizing is not a supporting detail in a trading system. It is the mechanism that determines whether the system fulfills its objective.
Starting small and scaling up makes sense in any skill-based endeavor. Trading is no different. But scaling is not neutral — it amplifies whatever is already present.
Trade too large and the effects are immediate. Gains escalate attitude from confidence to euphoria to perceived invincibility.
“This is easy. I’m good at this.”
Lifestyle decisions begin to form around recent performance.
Trade too small and the opposite problem appears. Losses lack consequence. There is not enough discomfort to reinforce discipline. Without meaningful feedback, focus softens and execution drifts.
Most traders understand this conceptually. Far fewer internalize what it means when size begins to increase.
Position sizing is rarely just a mathematical problem.
It is primarily a psychological one.
The mistake is assuming size is simply a dial you can turn up when performance improves. In reality, increasing size alters the emotional weight of every decision. The numbers may scale proportionally, but the internal response does not.
As performance improves, a predictable thought appears:
“If I increase size, I can start making real money.”
The logic feels sound.
But it rests on a dangerous assumption:
That edge scales linearly with size.
It does not.
Variance expands immediately. Confidence adjusts more slowly.
The Scaling Illusion
When you increase size:
Emotional volatility increases
Drawdowns feel sharper
Sequence risk becomes more visible
Small losing streaks feel larger than they mathematically are
Your trading system may be ready.
Your nervous system may not be.
That gap is where most damage occurs.
The math may look attractive, but psychology determines whether you can stay aligned long enough for edge to play out.
The Common Pattern
Scaling errors tend to follow a predictable cycle:
Trading goes well
Confidence builds
Size increases
The market rotates or consolidates
A normal losing streak appears
Losses feel outsized
Size is reduced
Market conditions improve
The larger move happens at smaller size
This is not poor trading.
It is scaling based on emotional equity highs rather than market structure.
Professionals do not increase exposure solely because they feel good. They increase exposure when data and market dynamics support it.
That distinction matters.
The Breakout vs. Pullback Bias
To see how this plays out in practice, consider a specific trading tactic.
Many traders prefer tight pullbacks over breakouts.
The reason is rarely discussed.
Tight pullbacks create attractive asymmetry:
Smaller stops
Larger theoretical R multiples
Faster gratification when price moves immediately
But preference without data is memory bias.
If you cannot answer these questions precisely, sizing is guesswork:
What is your win rate by setup?
What is your average R multiple?
What is your largest historical losing streak?
What is your average drawdown? What is your maximum drawdown?
How does performance change in trending versus rotational environments?
Without that distribution map, increasing size is leverage without volatility awareness.
When size increases, these unexamined preferences become amplified. What felt like a small tactical bias at lower exposure can materially distort decision-making at higher risk levels.
Do not let preference override process. Avoid emotional sizing. Respect risk first.
The Real Risk: Sequence Fear
Most traders are not afraid of one larger loss.
They are afraid of a statistically normal losing streak at larger size.
If your system wins 50–55% of the time, a five- to six-trade losing streak is not extraordinary.
It is math.
The question is not:
“Can I handle a larger single loss?”
The real question is:
“Can I continue executing my process through a normal losing sequence without deviation?”
If the answer is uncertain, the size is too large.
Proper position sizing aligns mathematical risk with psychological stability.
Why Jumping Risk Tiers Fails
Many traders attempt to move from conservative risk to aggressive risk in one step.
That is not scaling. It is shock.
Exposure should expand incrementally and systematically, not emotionally.
The brain does not scale linearly with account size. Psychological tolerance must be trained.
Scaling from low risk directly to full risk multiplies mental load before adaptation occurs.
That is how good systems get abandoned.
A Professional Procedure for Scaling
Scaling should follow a structured process.
1. Collect Data First
Commit to a fixed period of performance tracking. No size increase. Just measurement.
Track:
Win rate by setup
Average win and loss
Expectancy
Maximum historical losing streak
Maximum drawdown
2. Simulate Higher Risk
Model what your equity curve would look like at the next incremental risk tier.
Not double. Incremental.
Understand the potential drawdown in advance.
3. Increase in Small Increments
Move exposure gradually.
Small increases allow:
Emotional adaptation
Process integrity
Confidence built from data, not impulse
Scaling should feel almost boring.
If it feels dramatic, it is too large.
4. Evaluate Under Real Conditions
Do not judge increased size during abnormal volatility spikes.
Evaluate during normal market structure.
We want alignment across timeframes and across volatility regimes.
The Deep Truth About Making Real Money
The desire to scale often comes from urgency.
Identity.
Impatience.
Comparison.
The feeling that progress is not fast enough.
But steady compounding at sustainable size is professional.
Large exposure without distribution clarity is speculation.
Your job is not to maximize adrenaline.
Your job is to survive variance long enough for edge to compound.
Risk management is what keeps you in the game.
This is not about trading bigger. It is about trading better at larger size.
The sequence matters.
Do it less.
Do it better.
Do it bigger.
Final Thought
Scaling is not about courage.
It is about clarity.
Increase size only when:
Your data supports it
Your process remains intact
Your emotional stability is unchanged
Your risk is defined
Your execution does not deviate after a normal losing streak
Proper position sizing is not aggressive.
It is disciplined.
The goal is not to trade bigger.
The goal is to trade long enough — and consistently enough — that size increases become a natural byproduct of process.
That is how professionals scale.
If you like how I think here, this is where that thinking is applied every day.
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Great post Andy, ton of wisdom and very well written. May i ask how or what software you use to track your performance, do you journal? Thank you!
The way I see my trading, this balancing act around position size will always be there. It's also backed up by tons of possibilities for partial entry and exit scenarios. I'm gonna face it head-on and hopefully move forward at a steady pace.
Thanks a lot for your awesome contribution to this exciting topic, Andy.