Defining What Scalability Means

Why Trading Rules Don’t Change 

It would nearly defy logic to say that a trader with a $10,000 account can trade the same as the trader with a $100,000.00 account. It’s a question I get asked almost daily, “What size account do I need to have to use your strategies?” 

My reply is always the same…

“Any size account because we scale in and out of our trades.” 

This notion that trading a small account versus a large account is different is very misleading. Sure, there are some stocks and futures that are too expensive for a smaller account, but that’s a conversation about affordability — we’ll talk about that another time.     

Let me show you an example of what I mean… 

Following is the XLF – Financials Exchange Traded fund (ETF). 

Remember, the strategy of “scalability” applies to futures, options, and stocks on any time frame. 

In this trade, we bought options for $255 per contract. Certainly, that’s an affordable symbol for many account sizes. However, how does “scalability” work for account sizes that have such a disparity?

Our trading rules remain the same. 

For starters, we generally don’t want to risk more than 5% of our account. In this example, if you have a $10,000 account and you don’t want to risk more than 5% of your account you could have bought two contracts — risking $510. 

If you have a $100,000 account and, again, you don’t want to risk more than 5% of your account, you could have bought 20 contracts — risking $5,100.

We ultimately closed out at $860 per option. 

So let’s do the math: 

  • The $10,000 account bought two contracts… potential earnings are 2 x $860 = $1,720.
  • The $100,000 account bought 20 contracts… potential earnings are 20 x $860 = $17,200.

This is what I mean when I say we follow a “scalable” approach. Our analysis and trading rules are always the same.

Keep Up With The Markets

Sign up now to receive Raghee’s FREE Countdown Trader Newsletter. This is where she shares her market outlook along with actionable trades and strategies you can start using TODAY...

We will never sell your information to any third parties.

Free Downloads

GRaB Candles Indicator

Identify not only the trend but also the sentiment and momentum in the market on any charted time frame.

TradeStation | ThinkorSwim

Propulsion Dots Indicator

A dynamic indicator based on the comparison of 2 EMAs in the form of buy and sell dots.

TradeStation | ThinkorSwim