Position Smaller to Trade Bigger

LOW STRESS - So that was quick with USDTRY. I had said I would be looking to get in and out with this one and after getting a very nice retreat early Monday, I exited the position for a nice profit. I did something similar with my USDJPY short, as I exited some of this position for a small profit and left the remaining portion open out of the money. But this leaves me room to build back into the position on another overdone rally, and also lets me sit back with very low stress in the event USDJPY continues to run higher. I view it as a win-win now. Either we drop and I make money or we rally back up and I get a chance to sell back into the position in a larger size. 

CUSHION - And what of my other trades? AUDNZD is doing its thing and is a no stress in the money trade right now. GOLD is also in the money but is trying to get going. This leaves us with the one pain of a position that I still love so much and that has been mostly good to us over the years despite the trend. That's the SPX500 short of course. I'd like to see if I can hang on and catch another sharp down move, and as per Monday's report, I'm happy to sit back and give it room into the 2250 area. Ideally of course, we stall out sooner and reverse lower. Right now, I think we need to see an initial close below 2180 to get this trade going again. 

MENTAL GAME - But the key takeaway with the trading and if there is one thing you should make sure to adopt if you've been struggling, is that you need to make sure you are trading position sizes that will let you sleep at night. You simply can't trade well if you are always thinking about your positions, especially if those positions are losing positions. It all comes down to the psychology of trading. Simply put, what might be a losing position to you, is nothing more than an out of the money position to me. That is to say, I am fully aware of the massive swings we can see in this market and I take positions accordingly, so that when there are big swings, I have the luxury of being able to sit back and take it in stride. I don't panic and am able to trade my way through. 

It's critical in trading that you try and give yourself as much of an advantage as possible. Via @joelkruger

THE EDGE - As far as my mindset into a trade goes, I start small and tell myself what I highlighted above. If the position continues to run against me, it will also set up a more interesting opportunity to build into the position. If however, the position immediately goes my way, I won't have anything to be worried about and will be able to sit back and feel good about a quick profitable trade. I can't tell you how many people I know that have blown up accounts because they have taken positions that are far too big to be taking and ultimately, they can't stomach inconsequential price swings which to them are very consequential on account of their ridiculous position sizing. So make sure to trade in a way where you are always thinking positive and always giving yourself an edge. It helps!

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SPX500, Yen and Euro

Here's a look at the downside we could see in US equities and how this, along...