Advantage of looking at your trades as a Sequence vs one shots

[murray t turtle]

This post is not intended for those that trade size large enough to affect quotes in the market being traded.

One problem with scaling is it involves at least 2 setups!

If your setups are tested, it is almost certain one setup will be inferior to the other.

Scaling out is insurance against position risk... at a cost of reduced profit.
Scaling in may or may not be insurance. But used as a potential corrective technique, position risk is increased!

Neither reduced profits or increased risk is in the best interest of the trader.

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Good last line/may quote that...............................................
MOST likely a swing trade on SPXL, spy, SPYG will involve 2 or more set ups, each symbol[rungs of a ladder].
True/ almost certain one setup[ ring of a ladder ] will be lower or higher,.
With 100,000 traders could be a few that daytrade with profits + do one all in[non ladder entry] entry per trade.
Mr Scata said a turtle ''scaled in so fast looked like one trade. So why bother scale in in?? ''LOL, Because looked like one trade\ is not the same @ all ,as one trade.
And sometimes a starting position scale never gets any bigger,why?? Because you found some thing better, or some thing like a medium or long term trend changed.........

 

[yc47ib]

This post is not intended for those that trade size large enough to affect quotes in the market being traded.

One problem with scaling is it involves at least 2 setups!

If your setups are tested, it is almost certain one setup will be inferior to the other.

For example, a simple BO trade... you enter half position at 2 ticks above or below the break. You then add the other half at 5 ticks in your favor. This is 2 different setups!! One setup, 2 ticks above/below, and one setup, 7 ticks above/below. One of those setups is almost certain to be inferior and should not be taken!!

Scaling out is insurance against position risk... at a cost of reduced profit.
Scaling in may or may not be insurance. But used as a potential corrective technique, position risk is increased!

Neither reduced profits or increased risk is in the best interest of the trader.

Good philosophical discussion, but in reality, there are too many factors in the market for human brain to make judgement calls fast enough and with low prob. being correct anyway, the easiest way to fight the chaos is using random chaos, that is, scaling in and out. Anyone who did this knows it works, both financially and psychologically. until it does not, that is when position sizing and risk management come in.

 

[Illini Trader]

Looks to me like this is a losing strategy as it pertains to "Day Trading". The more you add to a "Long" position scaling in at higher prices the "higher" your average position cost. Reversals can quick and severe so a good market read can quickly turn into a loss and the mind games can horrify you as you are now losing at your full position load. A relatively minor setback can created a losing trade even if the original trade continues back in your original direction. Definitely not for me.

 

[KCalhoun]

Looks to me like this is a losing strategy as it pertains to "Day Trading". The more you add to a "Long" position scaling in at higher prices the "higher" your average position cost. Reversals can quick and severe so a good market read can quickly turn into a loss and the mind games can horrify you as you are now losing at your full position load. A relatively minor setback can created a losing trade even if the original trade continues back in your original direction. Definitely not for me.

Interesting point, I understand. What I do is trade the same instrument several times in a day. Not so much like es traders would scalp, but closer to that then say putting on a single large position of a thousand shares.

The purpose of that, of breaking your trade into several pieces, is to avoid initial large stops from a large position immediately going against you.

The strategy of trading multiple times works best with instruments that have wide trading ranges, for example I like stocks priced $15 to $40 with big ranges of at least two to three dollars.

I look at each first trade as a starter position, meaning I want the unrealized pnl profit from that to minimize risk for the second and subsequent positions. Your point is exactly right though regarding cost basis being higher the longer you wait, so you need to enter before it's ran near the edge of its daily trading range.

 

[tiddlywinks]

the easiest way to fight the chaos is using random chaos, that is, scaling in and out. Anyone who did this knows it works, both financially and psychologically. until it does not, that is when position sizing and risk management come in.

I completely dis-agree.

First, "random chaos"... If something is truly random, there is no analysis or predefined expectation that can be used to accurately time the occurrence until AFTER it occurs. Keeping the proper air pressure in the tires of a car does not prevent a blowout on the freeway doing 65mph.

Secondly, position sizing and risk management are part of the analysis portion of trading. They are not something to consider after a trade goes against you. That is kamikaze with no long-term survival rate. Beyond the analysis portion is a decision ... buy, sell, hold, or wait. Those are the only decision choices, followed by taking action on the decision that has been made.

Position size and risk (initial risk and trade maintenance risk) are determined in the analysis, not after! And not on-the-fly. During analysis is where the technique to scale would be considered as viable or not FOR THIS TRADE. It has been tested. Choosing to not adhere to your analysis and decision is off topic, and certainly in generic terms, ill-advised.

 

[KCalhoun]

Position size and risk (initial risk and trade maintenance risk) are determined in the analysis, not after! During analysis is where the technique to scale would be considered as viable or not FOR THIS TRADE. .

Exactly. Position sizing strategy needs to be determined ahead of time for each unique trade and it's extremely different from trade to trade.

 

[deaddog]

Exactly. Position sizing strategy needs to be determined ahead of time for each unique trade and it's extremely different from trade to trade.

Is there an optimum process for adding and exiting trades.

 

[KCalhoun]

Is there an optimum process for adding and exiting trades.

Great question, I've tested for many many years. The challenge is that it's a combination of two processes; the first and most important is market direction and volatility, as the environment within which the trade is made. That's why simple chart patterns don't work as consistently as we would like. For example, if the market is flat and choppy like it was Friday, you'll see a lot more false breakouts and range-bound trading. So there's that. Call that the strategic level.

The other, tactical process that we all focus on its individual chart pattern and time of day for the individual stock or ETFs that we're trading.

 

[Math_Wiz]

Can you describe your thought process as you are about to add to a winning position, Ken? There are so many possibilities for "how to add to a winning position", such as:

1. SPXL has moved .25 in my favor, I will double up immediately.
2. SPXL has moved .25 in my favor, I will wait for a pullback and then double up.
3. SPXL has moved .25 in my favor, I will wait for a pullback and then increase my position by 50%.
4. SPXL has moved .25 in my favor, but it's only been 5 minutes since my first entry. I will wait at least 30 minutes since my first entry, and if SPXL is still in my favor, I will add.

And on and on. So many possibilities. How do you go about it, Ken?

 

[KCalhoun]

Can you describe your thought process as you are about to add to a winning position, Ken? There are so many possibilities for "how to add to a winning position", such as:

1. SPXL has moved .25 in my favor, I will double up immediately.
2. SPXL has moved .25 in my favor, I will wait for a pullback and then double up.
3. SPXL has moved .25 in my favor, I will wait for a pullback and then increase my position by 50%.
4. SPXL has moved .25 in my favor, but it's only been 5 minutes since my first entry. I will wait at least 30 minutes since my first entry, and if SPXL is still in my favor, I will add.

And on and on. So many possibilities. How do you go about it, Ken?

I set up a sequence of 2-4 buy stop OTO conditional orders ahead of time.

For example if it's at $21.8 premkt I might have 3 orders, with buy-stops at 22.2 22.6 23.1