Most traders associate over-leveraging (by aggressive position sizing) with the dangers of destroying your trading account. And although this is true when over-leveraging to extreme levels, even over-leveraging to a lesser extent is dangerous.
Most traders associate over-leveraging (by aggressive position sizing) with the dangers of destroying your trading account. And although this is true when over-leveraging to extreme levels, even over-leveraging to a lesser extent has a detrimental effect on reward/risk.
Increasing leverage with higher position sizing will initially lead to exponential growth (for any trading strategy that has a genuine edge). The first sign of over-leveraging is when large drawdowns start to break up this exponential growth. When you see this, you know it's time to leverage down. However, increase leverage further and you risk destroying your trading account.