Trading Psychology
Position Sizing Emotion — Definition & Example
The tendency to size by feeling — bigger when confident, smaller when uncertain — rather than by rule.
Position sizing is one of the most rule-amenable parts of trading, yet it's where emotion most aggressively overrides discipline. The "high conviction" trade gets 2-3x normal size; the "uncertain" setup gets half. The result is that emotional confidence drives risk-taking — and confidence has a poor correlation with trade outcomes. Mechanical sizing rules (% of equity, ATR-based) eliminate this leak.
Example
A trader's normal size is 50 lots. After 3 wins they take 100 lots on the "obvious" 4th setup, which fails and erases the morning gains. Emotion-based sizing made the worst trade the largest.
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