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Can scaling/averaging down be a viable trading system?
- Thread starter gdrew77
- Start date
Quote from moussaka:
I still don't understand, why do you need multiple accounts? What's the difference with just putting all of your capital in one account and doing the exact same buys/sells as you would with multiple accounts? More accounts doesn't give you more margin.
Why would you not still accumulate 1 point profits using one account? Can someone explain to me how the total net would not be different if exact same trades are placed?
There is absolutely no difference. People who insist on needing 2 accounts to buy/sell just don't understand the math. Rather amusing I think.
Scalp trader wrpte"
"Adding to losers works if you trade with the long term trend. For example, during the bull market in the stock market(late 90's) everyone who added to losers from the long side looked like a genius. The problem was most people did not stop adding to losers when the market turned!!"
In 1997 I wrote a short-term trading system for stocks that adds to losing positions (the scales are wide--around 1.5 atr each). The system did better (higher returns with lower dd) when it added to losers than it did without the second buy.
Its best days BY FAR were during the bear market.
"Adding to losers works if you trade with the long term trend. For example, during the bull market in the stock market(late 90's) everyone who added to losers from the long side looked like a genius. The problem was most people did not stop adding to losers when the market turned!!"
In 1997 I wrote a short-term trading system for stocks that adds to losing positions (the scales are wide--around 1.5 atr each). The system did better (higher returns with lower dd) when it added to losers than it did without the second buy.
Its best days BY FAR were during the bear market.
moussaka-------lets say news just hit at 10:00 eastern time and price has just made a 3.25 point range in the last 15 seconds--------how can I be long and short at the same time in a varied ratio {based upon the current trading price level} and catch all the long covers/adds and all the short covers/adds in one account? the short side needs to do its thing in one account and the long side needs to do its thing in a separate account-----this way BOTH sides are hitting profits. if you are using just one account you are either long or short----------you can't be both at the same time properly.
risktaker--------yes futures only for myself but this could be done with about anything that you can have a good deal of success determining what range of price movement you will have on a monthly basis.
trading with multiple accounts is as I have said before a matter of the proper {and optimal} mechanical function of the system---------plus who cares if you use 38 accounts, what is this fascination with the amount of accounts used----this is the last thing that a person needs to figure out. my multiple accounts do not cost me one extra dime a month. this is not about I need to follow "math" and have one account, this is about what works-------------I have proven to myself in no uncertain terms that multiple accounts is the reliable and proper way to trade the system from a sound function stand point. wheeeew!
risktaker--------yes futures only for myself but this could be done with about anything that you can have a good deal of success determining what range of price movement you will have on a monthly basis.
trading with multiple accounts is as I have said before a matter of the proper {and optimal} mechanical function of the system---------plus who cares if you use 38 accounts, what is this fascination with the amount of accounts used----this is the last thing that a person needs to figure out. my multiple accounts do not cost me one extra dime a month. this is not about I need to follow "math" and have one account, this is about what works-------------I have proven to myself in no uncertain terms that multiple accounts is the reliable and proper way to trade the system from a sound function stand point. wheeeew!
Macro, I've "kind of" done something similar in the past but your math still doesn't add up. For example...if I'm long 8 futures in acct#1 and short 5 futures in acct#2, then I'm really long 3 futures contracts. No need to have so many positions for nothing. What am I still missing?
Quote from MacroEvent:
moussaka-------lets say news just hit at 10:00 eastern time and price has just made a 3.25 point range in the last 15 seconds--------how can I be long and short at the same time in a varied ratio {based upon the current trading price level} and catch all the long covers/adds and all the short covers/adds in one account? the short side needs to do its thing in one account and the long side needs to do its thing in a separate account-----this way BOTH sides are hitting profits. if you are using just one account you are either long or short----------you can't be both at the same time properly.
risktaker--------yes futures only for myself but this could be done with about anything that you can have a good deal of success determining what range of price movement you will have on a monthly basis.
trading with multiple accounts is as I have said before a matter of the proper {and optimal} mechanical function of the system---------plus who cares if you use 38 accounts, what is this fascination with the amount of accounts used----this is the last thing that a person needs to figure out. my multiple accounts do not cost me one extra dime a month. this is not about I need to follow "math" and have one account, this is about what works-------------I have proven to myself in no uncertain terms that multiple accounts is the reliable and proper way to trade the system from a sound function stand point. wheeeew!
MacroEvent,
I must not understand your system correctly. From my understanding:
When activating your system you have 50 contracts long in the long account and 50 short in the short account. Say the starting price is 1200. When price goes up to 1201 you want to add 1 contract to the short account and cover 1 in the long account. To do that you have a sell 1@1201 limit order in the long account, and a sell 1@1201 limit order in the short account. For the next point you have sell 1@1202 in long account, sell 1@1202 in short account. To cover the down moves you have buy 1@1199 in long account, buy 1@1199 in short account. It appears you have the exact same set of limit orders outstanding in both accounts at any given time. It doesn't make sense to use two accounts this way. What am I missing? Furthermore, this system is easily automated, why do it manually? The computer can react much faster than you.
I must not understand your system correctly. From my understanding:
When activating your system you have 50 contracts long in the long account and 50 short in the short account. Say the starting price is 1200. When price goes up to 1201 you want to add 1 contract to the short account and cover 1 in the long account. To do that you have a sell 1@1201 limit order in the long account, and a sell 1@1201 limit order in the short account. For the next point you have sell 1@1202 in long account, sell 1@1202 in short account. To cover the down moves you have buy 1@1199 in long account, buy 1@1199 in short account. It appears you have the exact same set of limit orders outstanding in both accounts at any given time. It doesn't make sense to use two accounts this way. What am I missing? Furthermore, this system is easily automated, why do it manually? The computer can react much faster than you.
risktaker------ yes in a basic form you are right, but this is not a basic way of trading. There are very good mechanical functioning reasons why to trade this separately.
when the london bombing hit I had accumulation orders sitting for the long side down only to a certain level below the current pre-event price level. the short side had covers down a bit further-------- by having things separated I was able to managed the two sides more to my advantage versus having everything as one position. If I was 40% short to 60% long when this happened, having no add orders down more then 5 points from the current trading price level on the longs and having the short side with the ability to freefall gives you advantages for protection.
at the release of the bombing news I was heavy short to long at the pre-news price level. as the price was dropping fast I was able to gain more profits by allowing the shorts to drop farther prior to covering what would have been covered automatically. the long side I was able to hold off accumulating until much lower price levels which benefits the long side cost basis. having the sides separated gives you functional advantages when the market has abnormal range events. you have the ability to optimize profits many times a year when the trade is separated. the overall position is much better protected against these type of events as two separate accounts----------this is my experience.
I do not do this manually except when I see something is in the news that may be very bad. I have only turned off the automation for news events a few times. the london bombing night I had an alarm that triggered at my last long accumulation level------after seeing what was going on I decided to trade everything manually all the way until the close that day {very exhausting day---------taking bathroom breaks was tough-----hahaha}.
when the london bombing hit I had accumulation orders sitting for the long side down only to a certain level below the current pre-event price level. the short side had covers down a bit further-------- by having things separated I was able to managed the two sides more to my advantage versus having everything as one position. If I was 40% short to 60% long when this happened, having no add orders down more then 5 points from the current trading price level on the longs and having the short side with the ability to freefall gives you advantages for protection.
at the release of the bombing news I was heavy short to long at the pre-news price level. as the price was dropping fast I was able to gain more profits by allowing the shorts to drop farther prior to covering what would have been covered automatically. the long side I was able to hold off accumulating until much lower price levels which benefits the long side cost basis. having the sides separated gives you functional advantages when the market has abnormal range events. you have the ability to optimize profits many times a year when the trade is separated. the overall position is much better protected against these type of events as two separate accounts----------this is my experience.
I do not do this manually except when I see something is in the news that may be very bad. I have only turned off the automation for news events a few times. the london bombing night I had an alarm that triggered at my last long accumulation level------after seeing what was going on I decided to trade everything manually all the way until the close that day {very exhausting day---------taking bathroom breaks was tough-----hahaha}.
kubilai-----------I only have long accumulation orders allowed down from the current trading price level within a period of parameters. if price drops many points in a very short period of time the long side accumulating stops-------there is also some controls on the short covering. if something makes the market move down far and fast, I need to have the short side able to freefall if needed and the long side become static in size.
this is in some ways the same thing goldman or others are doing-------they hold varying sizes of short and long positions in separate accounts and systems to profit from moves in either direction of the market all at the same time. all they do is vary the ratio's according to what price range they project moving forward and where the current price is in relation to the projected range.
in the beginning i was trading this manually with other people, one traded the long side, one traded the short side, and a third person filled in when someone had to go to the bathroom or go get food {i wont even get into how we covered the night shift}-----------it did not take long for me to see that automation was critical.
this is in some ways the same thing goldman or others are doing-------they hold varying sizes of short and long positions in separate accounts and systems to profit from moves in either direction of the market all at the same time. all they do is vary the ratio's according to what price range they project moving forward and where the current price is in relation to the projected range.
in the beginning i was trading this manually with other people, one traded the long side, one traded the short side, and a third person filled in when someone had to go to the bathroom or go get food {i wont even get into how we covered the night shift}-----------it did not take long for me to see that automation was critical.
Macro...thanks for the idea of having separate accounts 1 long and 1 short in different ratios. I don't think it is that simple, but I can see how this can reduce risk and help one go with the flow of the market. I understand that you must know when to accumulate and stop accumulating and when to book profits, but being either 100% long or short at different times of the day I must endure increasing heat as my positions scale in. Having another account can help me stay in some trades, possibly reduce position drawdowns, and reverse market direction easier. I'm still digesting this concept.