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riskarb, two questions are of real interest to me: 1. with respect to your current spx trade, for example - whether you had a strong hedge or weak hedge - how do you decide when to take it off if the market starts moving against the hedge (i.e. when you covered partial at 1271) ? and how many...

sounds good, i love your explanations, they're way better than learning from a textbook :) best of luck with your trades!

hi riskarb - it's great to see examples of how you hedge these... - is your hedging discretionary or what is your general methodology (if you could summarize)? i was looking at the spike in the VIX futures and options today - finally for the first time since they started trading, the vix puts...

you are considering only one type of probability, the probability of getting filled on a scale-in piece; i am also considering the probability of getting stopped out and the amount of stop loss which are all variable for each scale-in level. one would have to assume a probability distribution...

as i mentioned above, i am looking at a different form of scaling-in, entering against the current price movement. however, this second mention of scaling into trend has prompted me to take a fresh look at the Turtle rules. it's very interesting, according to the rules, the Turtles scaled...

i made an omission in my opening post - there is counter-trend scaling-in vs. in-trend scaling-in (i believe also referred to as pyramiding into a trend) - they have somewhat different analytical frameworks, i am working on counter-trend scaling-in, i.e. entering at progressively more favorable...

here's how i look at the expected risk for each successive scale-in piece, it is equal to: (i) probability of reaching a scale-in level (decreases for levels farther from the current price), multiplied by (ii) probability of hitting the stop (increases for levels farther from the current...

i think we differ on at least one important issue - it seems you are assuming that since it's gone lower, the chances of a bounce are higher... - as i mentioned in an earlier post, i am adhering to a statistical basis which assumes that the overall chances of a bounce are equal at best...

thanks a lot, i remember backgammon from my childhood :) i guess, as applied to trading, you are referring to some sort of a martingale angle here; it's a great subject, although personally i haven't gotten around to it yet.

thanks for the input, i have gone through similar iterations - let me show how i think about this (still very much work in progress) i am looking at this on a risk/return basis. on the return side, i am assuming that the probability-weighted return is constant/equal at any level within...

sorry, what's doubling cube? thanks.

agreed, i am looking to take a more specific, analytical probability-based approach to optimize the solution to the dilemma you are referring to. i do not see any benefits in this either, i am not considering this type of scaling-in, i am looking at scaling-in only at progressively better...

i think i used to side with a similar view... however, i think the right answers may be strategy-dependent: let's take the Dollar Index as an example, i may see a +-16-year base/support at 80+-; so i may chose my stop arbitrarily below that level and if it gets hit i know i am wrong about...

hey IV_Trader - if you are looking globally, i tend to think that emerging markets is where the weakness/fear gets most pronounced, it's where most of the "fluff" is (don't know if this is what they call "flight capital") - take a look at the ticker EEM - if i recall, the first weakness was a...

good opinion on scaling-in, as for scaling-out, i strongly disagree -however, i won't go into a discussion of scaling-out here, it would need a separate thread - currently, i am focused only on scaling-in methodologies.

you are failing to make an important distinction - to clarify, fyi here's a link that talks about "Averaging In, Not Averaging Down" http://bigpicture.typepad.com/comments/2006/04/scaling_versus_.html a quote from it: (although i don't agree with all of it absolutely, it conveys the right...

if you are assuming a totally static strategy, then the longer you go (the more observations you have), the more/farther outliers you will have eventually/inevitably, hence your statement is correct - in practice however, although my direct knowledge is limited, people get a shock once they...

while your point appears arithmetically logical, the reason for scaling-in is that you don't know exactly what behavior the price will exhibit within your scaling-in window - to illustrate with your example, let's say the price gets to $12: with scale-in, i will have 200 @ 11.50 avg price...

i don't quite understand - how can i get a more favorable price once it has reversed? - the point of scaling-in is to buy as the price is coming down (as per your example), not once it has reversed...

i have taken a look at the site - we have a German bank; its London branch acts as offering the product; UK FSA regulation; and the main contact support / application processing in New York - can this get any more "international" (i guess it's the world of borders-free forex, after all) :)