We will close above 1375 on cash today.
ES Journal Archive (2006 - 2008)
- Thread starter Buy1Sell2
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how about a chart and time frame
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http://www.elitetrader.com/vb/showt...ge=40&highlight=underleveraged&pagenumber=136
To decide whether or not averaging down is a good idea, one must first define what a losing trade is. Many traders feel that a 1 or 2 point loss is a losing trade. This is a common fallacy amongst newbies and underperforming traders. The trader who allows for noise and takes the big money off the table each time is the trader who will be in the game for the long haul. A losing trade is to be defined as one that loses more than 2 percent of total liquid net worth. What this means is that an underleveraged trader (and by the way, that is the way to trade), can average into positions until the point past the reaction low/high that has been determined as the get out point. As long as this averaging does not lead to a loss that is greater than 2 percent of total liquid net worth , then it is acceptable to add positions. In fact, it would be unintelligent not to do so. So, in summary, it's all a matter of what is defined as a losing trade. Calling a trade a losing trade without it violating the recent reactionlow/high is wrongheadedness at it's finest. Romik is correct here and actually couldn't be more correct. I have been averaging into positions for nearly 26 years and this is the way pros trade.
Note: If you have a 5k account and are averaging in, then you need to stop trading or go to trading 1 lot of corn., which is where a 5 k account should be.
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Buy1Sell2-
Been trolling the threads and came across the above. Would it be possible to expand on this using some sort of walk-thru example showing how you would average down into a potential direction change utilizing the 2% risk against the most recent reaction low/high using the 1:1 leveraging idea. Seeing how an actual trade should be played would help tremendously.
Thank You.
http://www.elitetrader.com/vb/showt...ge=40&highlight=underleveraged&pagenumber=136
To decide whether or not averaging down is a good idea, one must first define what a losing trade is. Many traders feel that a 1 or 2 point loss is a losing trade. This is a common fallacy amongst newbies and underperforming traders. The trader who allows for noise and takes the big money off the table each time is the trader who will be in the game for the long haul. A losing trade is to be defined as one that loses more than 2 percent of total liquid net worth. What this means is that an underleveraged trader (and by the way, that is the way to trade), can average into positions until the point past the reaction low/high that has been determined as the get out point. As long as this averaging does not lead to a loss that is greater than 2 percent of total liquid net worth , then it is acceptable to add positions. In fact, it would be unintelligent not to do so. So, in summary, it's all a matter of what is defined as a losing trade. Calling a trade a losing trade without it violating the recent reactionlow/high is wrongheadedness at it's finest. Romik is correct here and actually couldn't be more correct. I have been averaging into positions for nearly 26 years and this is the way pros trade.
Note: If you have a 5k account and are averaging in, then you need to stop trading or go to trading 1 lot of corn., which is where a 5 k account should be.
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Buy1Sell2-
Been trolling the threads and came across the above. Would it be possible to expand on this using some sort of walk-thru example showing how you would average down into a potential direction change utilizing the 2% risk against the most recent reaction low/high using the 1:1 leveraging idea. Seeing how an actual trade should be played would help tremendously.
Thank You.
Ok let's take today's late signal from my chart. The signal occurred at 1381.50. We go long and set our stop at 1376. That's 5.5 points or 275. Let's round to 300 for commissions. Our account size is 100,000. That basically gives us a total of 6 contracts that we can trade. Keep in mind 6 contracts is roughly 4 to 1 leverage, which I don't necessarily advocate, but knowing that people here do use leverage, let's keep it that way for example's sake. If 6 contracts is our limit and we start with 2 instead of 6, I see no reason that we can't add 2 more at 1380 and perhaps 2 more at 1378. We know our signal is a very valid signal (especially today it was), so there is nothing wrong with averaging down. By the way, we won't lose 2 percent at the stop level now since our average price is now lower. The other side of the coin of course is why not just buy the 6 at 1381.50? That's ok too--you just can't average in then. The stop level dictates the position size. It's just that simple. Is the trade a losing trade at any level before the stop is hit? No--it can't be because the trade is not mature yet.
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By the way, we won't lose 2 percent at the stop level now since our average price is now lower.
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So do you ever just abandon the native stop and use a mental stop and keep averaging down until you reach your 2% risk limit? I am assuming not since it could easily place you in a very overleveraged position?
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The other side of the coin of course is why not just buy the 6 at 1381.50?
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I personally would rather average down since I never know where price will turn rather than risking it go against me and possibly never come back to my entry area.
Thank you that was very helpful.
By the way, we won't lose 2 percent at the stop level now since our average price is now lower.
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So do you ever just abandon the native stop and use a mental stop and keep averaging down until you reach your 2% risk limit? I am assuming not since it could easily place you in a very overleveraged position?
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The other side of the coin of course is why not just buy the 6 at 1381.50?
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I personally would rather average down since I never know where price will turn rather than risking it go against me and possibly never come back to my entry area.
Thank you that was very helpful.
here's what i learned papertrading in real time so far.
if you pull up a chart at the end of the day, one can clearly see where there are grails and where there aren't. for example, on this chart one can clearly see that there was no grail at 11:15. however, if you were trading in real time, you would have seen a grail at 11:15. this is because the rsi of each bar is recorded using the close price of that bar.
so between 11:00-11:15 there was a grail, but looking at the rsi in hindsight will not tell you that because each bar's rsi is recorded using the close price of that bar.
if you pull up a chart at the end of the day, one can clearly see where there are grails and where there aren't. for example, on this chart one can clearly see that there was no grail at 11:15. however, if you were trading in real time, you would have seen a grail at 11:15. this is because the rsi of each bar is recorded using the close price of that bar.
so between 11:00-11:15 there was a grail, but looking at the rsi in hindsight will not tell you that because each bar's rsi is recorded using the close price of that bar.
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