Adjusting Account Size to Trading Recommendations
I think it appropriate to discuss this topic as it relates to recommendations that I issue in the soft markets.
If you notice, I purposely base my soft market recommendations in ”units” rather than the number of contracts. My reasoning on this is to enable any reasonable size account the opportunity to participate provided it is within the account holders risk tolerance levels and trading goals. Commodity trading involves substantial risk and managing that risk holds a high priority.
A typical recommendation of mine will therefore be in units. How many contracts should comprise a unit is dependent on several factors. Both the size of the account and the risk tolerence level of the customer are two important factors that should dictate the number of contracts that comprise a unit, but a unit can be as small as one contract, or multiples, say five, ten twenty, or even larger.
Typically, I make every effort to limit the risk by employing option strategies that tend to try to limit the risk. Occassionally, I may use a combination of futures and options. My goal is to provide appropriate risk reward opportunities by managing risk effectively, but seeking potential for gains that make trading worthwhile.