Luke52

What derailleur? Also, what do you mean by "smaller and larger" gears? Are you referring to numbers (i.e. 1, 2, 3) or physical size of the sprockets?

I think you're doing it the wrong way. Your derailleur should be in the HIGHEST gear (i.e. smallest sprocket) when it has no cable tension on it. The corresponding position or number on your gear shifter should be the HIGHEST number.

So if your bike is a 7 speed, the shifter should be on "7." If it's 8 speed, the shifter should be on "8" and so on.

It sounds to me like you're attaching the cable at the derailleur when the shifter is in gear "1." So when you change the shifter to gear "2" it is releasing some cable, but the derailleur can't move any further, hence the cable slack you're experiencing.

Another theory is that you may have a low-normal derailleur. When a low-normal derailleur has no cable tension, it defaults to the LOWEST gear/largest sprocket. So if you're connecting the cable with the derailleur in its default position, but the shifter set to the highest gear, this would also explain the problem.

BUT I'm betting that the first scenario I explained is the problem, although we can't be sure until you tell us what derailleur it is.

So questions:
1: When you disconnect the cable and turn the cranks, which gear does the derailleur automatically shift to?
2: When you're attaching the cable, what gear position is your shifter set to (i.e. 1 or 7/8/9?)