Experienced trader feedback wanted - doubling positions when in a loss
- Thread starter silvermotion
- Start date
Quote from saxon22:
My system works best when the market is swinging but not in the extreme way. As to the notion that everybody made money last week: I know I did.
mind telling us a bit about your method? no need to go in details as i expect it will be classified info.
I have to agree with the majority here who contend that doubling down per se is pure insanity. However, this post raises an interesting question ...
After a series of breaches through consecutive support or resistance levels, do odds favoring a significant (profitable) reversal increase or decrease?
I sometimes hope that market will go against me (my position) so I could get a better price.
For Example:
My full position is 5 contracts.
based on charts I think that market will go down. So I enter short 1 contract on a first weakness. (even though risk reword is bad but I do not want to miss a move to the down side when and if it will happen). Should the market get to my desired resistance I will add another 4 contracts with a stop loss on all 5 contracts.
I do not add based on how many points market moved against me.
Is this considered double down or money management?
For Example:
My full position is 5 contracts.
based on charts I think that market will go down. So I enter short 1 contract on a first weakness. (even though risk reword is bad but I do not want to miss a move to the down side when and if it will happen). Should the market get to my desired resistance I will add another 4 contracts with a stop loss on all 5 contracts.
I do not add based on how many points market moved against me.
Is this considered double down or money management?
Interesting question. I have been simming an approach like that using S/R levels I have derived myself and trading with a directional bias. I start with one ES and double at each level (which could be ten points apart). At the end of the day I look at the maximum loss at each level as my size increases. Using a .05 loss amount for my funding needs It has been as high as $300k to maintain a loss of only 5% on the trade. The average seems to be in the $50-100k most days. So the bottom line for this would be can you stand the big hit when the loss in a position exceeds the 5% loss on any one trade?
One of the biggest reasons for trader failures, or blowing up, is adding to losing positions. That being said, let's chat for a second.
I have played hundreds of hours of a modified Martingale system with a (nearly) 50/50 game (Baccarrat), and if we take into consideration getting our costly comp's (trips, rooms, shows, etc.), we can "justify" the overall negative expectation to a point.
Without the fringe benefits, and more importantly, when dealing with something like the market which is not a "50/50" game, it makes no sense IMO.
The reason for adding or taking off a position has to be based on what the market is doing...as traders, we are responding to market conditions, and putting on postiions based on these conditions.
To simply "double down" is not even a valid premise in the market IMO.
If, for example, you're trading E's, you're long at 1480, and it breaks a support level, are you not better off closing and possibly reverrsing the postion vs. adding to the losing trade? We have to take into considration things like the VIX, recent movements, Premium/Discount to Fair Value, etc.
New traders would more often than not be better off closing a postion vs. adding to the losers IMO.
Treat each entry / exit as it's own event, based on the overall reading of the market.
(I could go on and on, but I'll spare you guys, LOL... just an overview from my perch).
Don
I have played hundreds of hours of a modified Martingale system with a (nearly) 50/50 game (Baccarrat), and if we take into consideration getting our costly comp's (trips, rooms, shows, etc.), we can "justify" the overall negative expectation to a point.
Without the fringe benefits, and more importantly, when dealing with something like the market which is not a "50/50" game, it makes no sense IMO.
The reason for adding or taking off a position has to be based on what the market is doing...as traders, we are responding to market conditions, and putting on postiions based on these conditions.
To simply "double down" is not even a valid premise in the market IMO.
If, for example, you're trading E's, you're long at 1480, and it breaks a support level, are you not better off closing and possibly reverrsing the postion vs. adding to the losing trade? We have to take into considration things like the VIX, recent movements, Premium/Discount to Fair Value, etc.
New traders would more often than not be better off closing a postion vs. adding to the losers IMO.
Treat each entry / exit as it's own event, based on the overall reading of the market.
(I could go on and on, but I'll spare you guys, LOL... just an overview from my perch).
Don