Adding to Profitable Swing Positions

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chessman

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This is one area I haven't been able to do successfully, that is adding to positions, I vacillate between putting on the entire size at once and scaling into a position.

For those of you who swing trade or follow long term trading systems, what mechanism you use to add to a position?

What do you think of this idea of using Maximum Favorable Excursion to add to winning positions? The idea here is that a system trade typically goes up lets say $300 and then turns back to end up as a losing trade. So $300 becomes a profit resistance level. However if a trade shows a profit of $400, a breakout, there is high probability that this may be a winner and might go up to $800-1000 etc. So you would add a second postion when $400 in profits is reached.

Here is a article that does a good job of explaining MFE. Most backtesting tools like Tradestation etc will chart variations of MFE, MAE.

http://www.tradingpulse.com/downloads/maximum.pdf
 
you don't do that with swing trading you do that with position trading.

the swing trade time frame is under a week, too short for scaling and out. In swing trading you use your max position size right at the beginning and dump it quickly if it moves against you. If it goes in your favor you let it ride and keep moving your stop, or use a trailing stop. Let the market take you out, you don't know how far it will go.
 
Quote from chessman:

This is one area I haven't been able to do successfully, that is adding to positions, I vacillate between putting on the entire size at once and scaling into a position.

For those of you who swing trade or follow long term trading systems, what mechanism you use to add to a position?
More...
Currently, for better or for worse, I handle it it like this: At the onset of a trade: I size my position so that if I'm stopped out, it loses what it would lose if I had put on an initial trade, as if with future plans to pyramid... I enter the total whole amount of shares. That's because I don't want to add on later at a higher price should the trade be profitable; I'd prefer, if the trade turns out to be profitable, to have entered the position at the first entry price in order to max profit. If I'm wrong, I lose only what the first, as-if-non-pryamided position would have lost. It's a rather simple calculation for the corresponding position size.
 
Well, I do it a lot...

It's to have a different viewing time horizon. Book Entry is the lowest time horizon I use but that's not really that important here but I look at swings within a certain trend.

Accumulation of the swing direction eventually is the trend so if I see the swing is in and with the trend I would trade accordingly.

But my accordinglies is based on system backtested conditions and entries. I try to keep all my trading decision within and/or have edge.

So for example:

1. I catch a swing.

2. The swing is topping but the top is also showing another strong trend coming. So I would exit half of the position.

3. I would wait set a another stop loss to keep my initial profit taking profit.

4. I would prepare to react to a pattern that would enable me to re-pyramid the position or even exit before the market hits my profit-keeping price.

Fortunately, I pay very low commissions at a firm so I can go in and out without commissions building up(relatively with retail traders... on bad days when I'm completely off, it actually does) I don't have to be so... upright (1 Entry and 1 Exit) with the trades as other traders... I wouldn't have to be so... right with the trend as long as I catch strong swings and ride it to the fullest...

Just my 2 cents...
 
Quote from dotslashfuture:

you don't do that with swing trading you do that with position trading.

the swing trade time frame is under a week, too short for scaling and out. In swing trading you use your max position size right at the beginning and dump it quickly if it moves against you. If it goes in your favor you let it ride and keep moving your stop, or use a trailing stop. Let the market take you out, you don't know how far it will go.
More...

dot and gms, I agree, I have not been able to find a good addon strategy for swing trading. Putting the entire position at once seems to work best.

However there are times when I see a massive multi-day rally, I just wish I had more contracts... there maybe some merit to adding contracts after a 2% gain, but I think it would be tough for me to handle psychologically, it may pan out in the long run, but then the system would also have more drawdowns and less profitable trades...
 
Quote from GannFreak:

Well, I do it a lot...

It's to have a different viewing time horizon. Book Entry is the lowest time horizon I use but that's not really that important here but I look at swings within a certain trend.

Accumulation of the swing direction eventually is the trend so if I see the swing is in and with the trend I would trade accordingly.

But my accordinglies is based on system backtested conditions and entries. I try to keep all my trading decision within and/or have edge.

So for example:

1. I catch a swing.

2. The swing is topping but the top is also showing another strong trend coming. So I would exit half of the position.

3. I would wait set a another stop loss to keep my initial profit taking profit.

4. I would prepare to react to a pattern that would enable me to re-pyramid the position or even exit before the market hits my profit-keeping price.

Fortunately, I pay very low commissions at a firm so I can go in and out without commissions building up(relatively with retail traders... on bad days when I'm completely off, it actually does) I don't have to be so... upright (1 Entry and 1 Exit) with the trades as other traders... I wouldn't have to be so... right with the trend as long as I catch strong swings and ride it to the fullest...

Just my 2 cents...
More...

Gann,

Your Gann language is somewhat Greek to me, I believe you're talking about scaling out of a position when it starts to top, and then have a mechanism to re-enter if the trend re-establishes itself?

Thanks
 
Quote from dotslashfuture:

I like that fitty cent song also.

but I don't understand your post. doesn't sound like a real system to me.
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I would go in and out based on swing entry/exit signals.

But the contract size would differ based on the overall trend.

For example:

There's a 5-min. MA(Moving Average) and 20-min MA.

If 5MA gives a buy signal, I would get in.
If 5MA gives a exit signal, I would get out... but if 20MA is up then I would exit half and add a position if the 5MA gives a buy again...

Thing like that...
 
Quote from chessman:



Gann,

Your Gann language is somewhat Greek to me, I believe you're talking about scaling out of a position when it starts to top, and then have a mechanism to re-enter if the trend re-establishes itself?

Thanks
More...

Simply yes...

Statistically (well, based on my system criteria and style of the system), the system performs better if I add when I am green than red. When I add a position, I have the system keep the profits that I made on the initial swing.

Taking some profits at some point works better than just waiting for the market to finish the reaction(well, we never know it is an reaction to start off with)...

This really depends on the type and the characteristic of the system criteria...

What I do is not a fool proof strategy... But something to consider coding in to see if it's compatible with your style of the system.
 
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