Adding to Winning Positions
- Thread starter jmsco
- Start date
Quote from wwatson1:
candle you remind me of morpheus from the matrix.
should i take the red pill or the blue one?
Brother wwatson1,
Lovely to hear from you again...
You take the blue pill and the story ends... you wake in your bed and you believe whatever you want to believe... you take the red pill and you stay in Wonderland and I show you how deep the rabbit-hole goes... remember that all I am offering is the truth... nothing more....
Love,
Candle
I suspect that in this case the lack of participation might be that many people don't scale in and out, and even more don't understand how/why, while others have discounted it and decided it doesn't work for them so ignore the thread...
It looks like a double edged sword. On the one hand, a good long ranging trade can benefit from adding more size, on the other hand, a long ranging trade that doesn't follow through leaves you adding size at just the point of failure so setting up a potential loss rather than taking a small profit.
There is then also the confusion element, because instead of running the trade and finding its natural conclusion, you could be looking to add, and consequently the view of what is actually happening can easily be obscured by this. Stopping in upon passing key points might be something that would work, because the break of a key point in the run will usually involve a catapult effect towards the next key (danger) point and your additional size gets picked up along the way.
Perhaps another approach might be to treat everything initially as a scalp, with smaller size, looking for the failure point and if you get lucky and it runs then add. at least that way you are not being obscured by looking for a point to add instead of being aware of the trade's failure point.
I guess there are pros and cons to any approach. It should be noted though, that if you are adding into a trade twice, you are actually running 3 different strategies simultaneously, which can also add to the confusion, and having a good understanding of exactly what you are doing is critical to the success of such an approach or losses quickly creep up on you without necessarily a realization that it is happening or how it is happening.
This also looks like the flip side of the question of taking profits/partials and then re-entering along the way for a continuation of the same run. Again something that merits discussion
Just a few disparate thoughts on the subject...
Natalie
So this post decreases the value of the whole thread?
Darn, I can never get in at the highest valuation! And I was going to make 3 more posts on this subject.
Hmm.. is anyone interested in trading four late thread messages for an early post anywhere on page 1?
Thanks.
Jason
P.S It would seem to me scaling in and out strategies should also be influenced by the extent to which the move in the direction of your trade is CONFIRMED vs. ANTICIPATED. If it is truly confirmed, and your study / testing / experiences indicates an extremely high chance of success, then why scale in., especially if you waited a little longer than normal in the existing trend for confirmation. It seems there are infinite permutations here. This is where art vs. science come into play.. especially considering the larger dynamics of the markets change over time. In other words, "I don't know" but I sure got the benefit of seeing my mouth move alot.
Adding to an already winning position is a delicate strategy that can make the difference in a traders ultimate success.
The additional position should only come into play after a key element of analysis. That key information can be a news report, business or political outcome that can adversely affect the market or a technical pattern etc. The trader must however maintain tight risk parameters on the new position knowing that the additional position changes the dynamics of the overall effect of the initially successful trade.
To add to this (pun intended)...
First of all, currently, I don't add to winning positions and plan on doing such in the near future to add a new dynamic to my trade methodology.
However, I do scale out at specific profit targets.
With that said...
I plan on adding to winning positions only when I get another trade signal in the same direction.
Simply...I don't want to be adding just because it has pullback or counter-thrust to a nice looking price area...
I just want to keep it simple and add to a winning position if there's another actual trade signal...
if there's no trade signal...I continue preparing to exit at the designated profit targets.
Hopefully its a trading plan that will work.
NihabaAshi