The Sorites Paradox and Position Sizing – When Does a Tiny Trade Become a Big Risk?

You add a small position. Then another. Just a bit more. Each trade feels harmless and tiny, even. But over time, your exposure grows. Then the market turns. And suddenly, what felt like a series of cautious entries becomes one oversized, dangerous position. You didn’t go all-in. But somehow, you’re all in.

Welcome to the Sorites Paradox of Trading; where small moves become large risks, one grain at a time.

What Is the Sorites Paradox?

In ancient philosophy, the Sorites Paradox asks a deceptively simple question:

If you remove one grain of sand from a heap, it’s still a heap. But if you keep removing grains one by one… At what point does it stop being a heap? Add another… and another… When does it become a heap?

The inverse is also true:

Add one grain of sand; it’s not a heap.

The paradox lies in indistinguishable steps that lead to significant change. Each step feels trivial. But collectively, they transform the whole.

Trading by the Grain

In position sizing, the same logic unfolds. You might add:

1. A 1% allocation
2. Then another 0.5%
3. Then “just a bit more on this dip”

None of these feel extreme. But 10 “tiny” trades later, you’re sitting on a 20% position in a volatile asset you never intended to overweight. You didn’t decide to take a big risk. You drifted into it. That’s the Sorites effect in your portfolio.

The Illusion of Inconsequence

Small trades draft you into emotional comfort. They feel safe.

“I can always exit.”

“It’s just a starter.”

“I’ll average in slowly.”

Each move is rational in isolation, but compounding exposure isn’t isolated. Risk doesn’t respect the size of your intentions. Only the size of your position.

Risk Isn't a Snapshot... It's a Trajectory

The danger with the Sorites dynamic is that you lose sight of cumulative context. You’re not tracking your trajectory, just your last trade. It’s like climbing stairs blindfolded; you might not know how high you are until you fall.

What started as disciplined scaling can morph into unconscious overexposure. And by the time you recognize it, your emotional capital is tied up too.

Micro-Sizing, Macro Consequences

This paradox plays out across strategies:

Dollar-cost averaging into a dying thesis
Adding to losers under the guise of conviction
Layering leverage in small increments
Overtrading with “just one more scalp”

Each step is easy to justify. But many “safe” actions can create unsafe portfolios. That’s the silent danger of granular risk.

So What Can You Do?

Here’s how to stay grounded when the Sorites Paradox creeps into your sizing logic:

1. Define Total Exposure Limits in Advance
Know your max size before you start building a position. Write it down. Respect it. Don’t “feel” your way there.
2. Track Cumulative Position, Not Just Entries
Always view new trades in the context of what you already hold, not what they look like in isolation.
3. Use Size Buckets, Not Gut Feel
Predefine tiers: small (1%), medium (3%), large (5%). Avoid endless slicing.
4. Audit Position Drift Regularly
Once a week, step back. Ask: “Is this still the portfolio I intended to build, or has it grown without my permission?”
5. Set Emotional Stop-Losses
Ask: If this drops 30%, how will I feel about the size I built? If the answer is panic, then you’re already too big.

Final Reflection

The Sorites Paradox doesn’t warn you with alarms. It works slowly. Quietly. It whispers, “Just one more.” But investing is full of thresholds you cross without realizing; until you’ve gone too far. So next time you add “just a little,” pause and zoom out. Because one more trade won’t ruin you…until it does.

Ever built a position you didn’t mean to? Had a tiny trade grow into a giant problem? Share your story in the comments.

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