Position sizing and emotional capacity
Position sizing models tell you what your account can survive. They say nothing about what you can hold. If your size makes you move stops, watch every tick, or exit early, it is too big regardless of what the spreadsheet says.
The protocol: The Sleep Test
Trigger — Any size increase, or any session where you moved a stop.
- 1.Before entry, ask out loud: "If this hit my stop right now, would I be calm in five minutes?"
- 2.If the answer is no, cut size by half and ask again. Repeat until the answer is yes.
- 3.Trade that size for five sessions and log how many times you touched a stop or exited early.
- 4.Zero touches across five sessions earns a 25 percent increase. One or more touches holds you at the current size.
- 5.Any stop moved against you drops you one step immediately, same session.
- How long —
- Ten seconds per entry; five-session review cycles.
- You know it worked when —
- Five consecutive sessions with no moved stops and no early exits at your current size.
- If it doesn't work —
- If you cannot get to a calm yes at any size, the problem is the setup's stop distance, not your size. Rewrite the stop rule before you trade it again.
Emotional capacity is a real constraint
Two traders with identical accounts and identical systems have different maximum sizes, because management quality degrades at different points. Ignoring that constraint is how good systems get traded badly.
Signs you are over your capacity
Watching every tick, moving stops, taking profit early, checking the position on your phone, or feeling relief rather than neutrality when you exit. Any one of these means you are a step too big.
Scale on evidence, not green days
Three winning days is the most common reason traders raise size and one of the worst. Evidence means clean management across sessions — not a streak.
Work this through with the Coach
Tell it what happened on your last trade and it will pick the protocol for your state, not a generic one. Free to use.
Questions traders ask
Should I ignore percent-risk rules?
No. Treat the percent rule as your ceiling and the Sleep Test as your current working size. You take the smaller of the two.
How do I know when I am ready for more size?
Five sessions with no moved stops and no early exits. If that sounds slow, compare it to the cost of one oversized week.