God Bless Averaging Up

[FanOfFridays]

Quote from Neet:
I trade the YM, I think 1 car for every 2.5-3.5k in your account is not overleverage. What made you think you knew my total equity

I absolutely do not know your account size. I tried to frame the comment in such a way as to make it clear that I was extrapolating from your statements. You said

"I had to cover for 30. 30 is a little high for me"

So either 30 is a little high for you or 1 car for every 2.5-3.5k in your account is in line with your account size, in this position. I was not attacking you, just making a point regarding optimal position sizing vis-a-vis the method you are describing. Did you not read the sentence where I said 'You seem to have a good concept of risk management'? If 30 cars x (2.5 - 3.5k/car) is 'a little high for you' in the sense that the product is nearing your total equity, there is the additional consideration of high correlation, but I don't think daytraders think in this way, and I assume you are a pure daytrader.

Quote from Neet:
However, technically, you are absolutely correct, they are unrealized profits but pretty much secured by the stops if you want to be realistic.

I do indeed want to be realistic. That's why I mentioned specific markets. I strongly disagree with the idea that your stops make your unrealized P & L 'pretty much secured' in any market. The indices are your best market if you are trading with this assumption. You are trading the indices. One thing that is clear is that you have never been in a futures market that makes a limit move or in an equity that is halted and opens at some ridiculous number.

Quote from Neet:
Hope it helps.

It was neither a help nor a hindrance. You seem a bit defensive about this. My post was an attempt to say that I think it's great that you are trying to trade this way, and that as long as you have certain parameters (correct market, position size and tight discipline) under control, you should be okay.

 

[Sponger]

So.......

1) You scale in

2) You never go all out

3) You let the trailing stops trigger your exit on each and every contract

More questions:

1) How you do you calculate your trailing stop - is it percentage based, or a hard value that you keep readjusting as you go?

2) If its not automatically being done for you, how do you keep up with adjusting the stops on all of those contracts as the price changes? Is software doing it for you?

Sponger

 

[Neet]

Nik,

I would honestly say 30 cars is a tiny bit heavy for me, not by much but I rarely go beyond 20-25 cars unless I catch a tremendous ride using this money management strategy. I think overleveraging in this money management technique is acceptable. Afterall, if you must add cars, things are looking very good for you.

The only reason I decided to go from my 25 limit to 30 is because I had trailing stops pretty much securing profit on more than half the cars. Personally, in the YM, I've never had a market order that executed above or below more than 2 points, ever. Which is why I can comfortably call stops well above my buying area, money in the bank.

As far as being defensive, it's possibly a secondary effect developed by a shield I wear when I post in the ET forums. Most of my posts are designed to help but the skepticism that cannot be ignored in the ET forums prevents me from lowering it. Too many frustrated traders here having bad days or who knows what, let's just say it's not the friendliest place on the net.

I'm definitely not including you in this special bracket just thought it would be appropriate to share.

Sorry I was not able to help.

 

[Neet]

Quote from Sponger:

So.......

1) You scale in

Yes

2) You never go all out

Never

3) You let the trailing stops trigger your exit on each and every contract

Yes

More questions:

1) How you do you calculate your trailing stop - is it percentage based, or a hard value that you keep readjusting as you go?

2) If its not automatically being done for you, how do you keep up with adjusting the stops on all of those contracts as the price changes? Is software doing it for you?

Sponger

1) Trailing stop I calculate based on daily and weekly ranges multiplied by a fixed percentage.

2) I started using the Matrix in Tradestation. Now, Im learning easy language to reduce the micro management hassle. Still very much a newbie in code-land.

Test yourself next week on paper using this money management technique. You will definitely have some fun with it.

 

[fseitun]

If I understood your trade management technique correctly, you should have great results in trending days and poor results with limited losses when markets are chopping.

I believe the only problem is that we do get very few trending days per month, so my guess is that you aren't able to hit your max size very often.

 

[Neet]

Quote from fseitun:

If I understood your trade management technique correctly, you should have great results in trending days and poor results with limited losses when markets are chopping.

I believe the only problem is that we do get very few trending days per month, so my guess is that you aren't able to hit your max size very often.

Fseitun,

You got it. Howevery, February was pretty trendy, so some real good plays there.

 

[Sponger]

Thanks Neet.

Don't stop posting - ever since last week, there has been a lot of intelligent discussion on the site again - it was going downhill fast. Now, serious debate and give and take. Good stuff, especially now that the kids and posers are gone (for now at least).

This thread was a great example of what I'm talking about.
Its nice to have a discussion without people flying off the handle, getting into arguments, swearing etc.

Trade on Neet
Sponger

 

[Neet]

For what is worth, I only do futures, particularly the YM because that's the instrument that my mentor used when I started learning them.

It's very liquid and since it is only $5 per point the instrument offers exit point flexibility.

I only daytrade and under no circumstances I swing a position unless I'm feeling the urge to gamble. I will admit, sometimes I do but with a ridiculous position like 1-2 car max. Sort of like hitting Vegas and joining the roulette table with a couple hundred dollars. However, I don't consider that trading one bit.

I want to take the opportunity to wish everyone a good trading week, it should be brutal after what happened last week. Stay focus, don't overtrade, wait for the right setups and reduce trading size by half because your stops and targets should be wider due to volatility, it's a wild market now

 

[Neet]

Another day to the test where scaling up or averaging up, pick your preferred term, produced killer results.

- Took two minor losses (both shorts)
- One decent win (long)
- Two huge wins (both shorts).

Do yourself a favor and look into it.

Good trading.

 

[Sponger]

AustinP, Apex82, and Neet made me realize that trading just one contract was actually working against me psychologically - couldn't hold on long enough with winning trades, getting out too often on retracements that later continued. (new futures trader here)

So I tried it today trading the YM contract, added another contract as the trade went my way. And it definitely helped me hold on longer for the ride - could exit one contract at a profit, then keep the other for more of the ride.

Now my next big issue is exits - my stops levels are too tight and close - I'm not giving positions enough breathing room, keep getting shaken/taken out, even though I'm right on the direction.

Anyone care to give some pointers on YM stop placements in this volatile environment?