Micro E-mini Madness (2% per day)

[Overnight]

...
Even though you still would have taken some heat, if you had waited until about 7736 and seen the break of 1 and 2, and then waited for the pullback, you would have had a great entry...

If I had waited until it hit 7736? This is what sux about hindsight analysis! If I had KNOWN it was going to go that low, then yeah, I would have added more contracts at that point. A lot more, to bring my average down!

But I did not know where the bottom would be! This was a severe move, that has still not recovered. So I am stuck in what was a day trade that has now become a swing. I will add no more to it, because I would have to start doubling size to get the average down lower in any meaningful amount.

This I cannot do now, because I remember May of 2019, and Oct 2018. You average at the wrong time, you will get fuxX0r3D. Nope, this is where I must sit, based upon my risk tolerance, temperament, account size, rules, religion, etc et al, lol

 

[volpri]

What I am trying to convey here, because you asked what kind of chart I was using, is that averaging down on a loser trade does not always work in your favor. That chart, in hindsight, shows that the trend was down. You see how I was averaging in on a loser, yes?

So at what point in that chart would you start going nuts with multiple contracts trying to mitigate a loss, and hope to get to green? You can see I stopped at 3 contracts, because I have no idea how far down this will go. It could be 20% down. Keeping on with the averaging to try to get to BE would have me so overexposed that there's no point.

You and I see things differently is all.

I understand what you are saying. It is always easier in hindsight and of course I have the benefit of hindsight in this case with your chart. Averaging down will not always work in ones favor however I try to pick the context to employ the method where it will MOST likely succeed.

I think when I get my 5 or 6 charts posted you will see what I am talking about as I took snapshots of the chart as time progressed and as I added positions. I will try to explain why I kept adding when I post the charts.

While there may be more below are three reasons why I average down.

My goal in averaging down isn’t to mitigate a loss although that is generally an added benefit. My primary goal is to get in cheaper once I have identified the most likely progression of price. So why average down? Why not just go all in when it is cheaper? Well what if I am off with my entry and I have my max position on and it goes against me? I can’t add because I have my max position on already. That would mean it has to then reverse back up to BE and then some for me to make any money with that all in max position. But if I don’t put on my max position then it goes against me as long as my directional premise it still valid I can add and add and each times it lowers my BE distance and once it turns it has less distance to travel to get me to BE and less distance to travel to get me in the money.

The secondary goal is to “be” in the market WHEN I think I have identified the likely direction. By taking a position ..any position..I am in. IF and I say if (because it doesn’t always give me a chance to average down) it takes off without any chance to average down. at least I would at least be IN with some position. AND can then entertain scaling in instead of averaging down.

A third goal. Since I am a scalper a scalper really needs to maintain a high win rate. Averaging downs gets me that potential as opposed to “all in” then getting stopped out only to see it turn in my direction. This last is yes sort of mitigating a loss.

 

[Overnight]

...

I think when I get my 5 or 6 charts posted you will see what I am talking about as I took snapshots of the chart as time progressed and as I added positions. I will try to explain why I kept adding when I post the charts...

Do you think you could average down on a range-bar chart, or just a time-bar chart? I's love to see you average down on a 20,10 chart in a market that drops hundreds of points, see how you make heads or tails out of it.

 

[volpri]

So at what point in that chart would you start going nuts with multiple contracts trying to mitigate a loss, and hope to get to green? You can see I stopped at 3 contracts, because I have no idea how far down this will go. It could be 20% down. Keeping on with the averaging to try to get to BE would have me so overexposed that there's no point.

You and I see things differently is all.

The simplistic answer is I wouldn’t be averaging down in this type of PA. And if I did start and saw I was wrong I am exiting and going the other way. By that first 2 legged push down after your first entry I would have identified the likely direction as down and therefore would have exited your first entry and start shorting on pb’s.

Apparently you were making your second entry and lastly your third entry hoping for a reversal back up. Understandable. But look at PAST PA BEFORE those two entries. You would have had the benefit of seeing that as price was unfolding. There was nothing in there to indicate an imminent forthcoming reversal. In both cases PA prior to the entry points all showed only minor reversals and a tight bear channel continuing. There was nothing showing me the bulls were pushing back strong enough to effect a possible reversal. Therefore, I would not have been adding contracts.

 

[volpri]

Do you think you could average down on a range-bar chart, or just a time-bar chart? I's love to see you average down on a 20,10 chart in a market that drops hundreds of points, see how you make heads or tails out of it.

I probably could but it would take me some time to adapt and practice.

 

[sstheo]

Overnight, the beauty of this method is it does not matter how big the chart is. AND the R or S lines are VERY easy to see in real time. I agree that there are big problems averaging into losers on a day like yesterday, but the question was basically "WHEN should I average in - assuming I am going to do it?" So that is what I am answering. Here are some examples in quiz form. Take my quiz and pass with flying colors and you will be set for life.

From this mornings action:

Q1: When is it "safe" to go long after the open on the NQ (MNQ)?

Scroll down for the answer after you have seriously tried to answer.







A1: After Resistance #2 is broken at 7695, wait for a pullback and enter somewhere above 7688 if possible. This long was good for 20 points or 80 ticks to 7718.

Q2: I was desperate to short the highs into the close today, but I have learned to be patient and to wait for a break of two support lines before trying a short after an extended move. Where am I proposing a short would be okay?

Scroll down for the answer.













A2:

(The short arrow should have been right at the break of 7,827)

In this case, a pullback did not occur right away, but if you had waited you could have gotten short on the pop back up to Support #2 at 7827 and gotten 20 NQ points or 80 ticks on the way down to 7806. This example makes a good case for just going with the trade immediately and not waiting for a pullback. OR you could try 2 contracts on each of these examples and take one immediately on the break and add 1 on the pullback to get a better average price.


I love to do these charts and am drawing these S and R lines all day every day for just this very reason. I miss a lot of trades, but this method keeps me out of some really bad ones too.

 

[sstheo]

If I had waited until it hit 7736? This is what sux about hindsight analysis! If I had KNOWN it was going to go that low, then yeah, I would have added more contracts at that point. A lot more, to bring my average down!

But I did not know where the bottom would be! This was a severe move, that has still not recovered. So I am stuck in what was a day trade that has now become a swing. I will add no more to it, because I would have to start doubling size to get the average down lower in any meaningful amount.

This I cannot do now, because I remember May of 2019, and Oct 2018. You average at the wrong time, you will get fuxX0r3D. Nope, this is where I must sit, based upon my risk tolerance, temperament, account size, rules, religion, etc et al, lol

You perfectly made the case for getting OUT immediately when you see a trade is going against you or at least having a fixed or ATR-based stop loss and NOT averaging down. I have learned the hard way. You notice I am using a fixed 40 tick ($20 stop) on my live Micro account for this very reason. I gave the example of averaging in based on the discussion here, I was not saying you should hold onto the losers all day looking for the bounce.

 

[sstheo]

The simplistic answer is I wouldn’t be averaging down in this type of PA. And if I did start and saw I was wrong I am exiting and going the other way. By that first 2 legged push down after your first entry I would have identified the likely direction as down and therefore would have exited your first entry and start shorting on pb’s.

Apparently you were making your second entry and lastly your third entry hoping for a reversal back up. Understandable. But look at PAST PA BEFORE those two entries. You would have had the benefit of seeing that as price was unfolding. There was nothing in there to indicate an imminent forthcoming reversal. In both cases PA prior to the entry points all showed only minor reversals and a tight bear channel continuing. There was nothing showing me the bulls were pushing back strong enough to effect a possible reversal. Therefore, I would not have been adding contracts.

Good point Volpri, you need to have a reason to expect a reversal at a certain level, and using prior support or resistance like daily opens, closes, high volume nodes, fibs, etc can give you confidence in certain areas.

 

[kellys]

What I am trying to convey here, because you asked what kind of chart I was using, is that averaging down on a loser trade does not always work in your favor. That chart, in hindsight, shows that the trend was down. You see how I was averaging in on a loser, yes?

So at what point in that chart would you start going nuts with multiple contracts trying to mitigate a loss, and hope to get to green? You can see I stopped at 3 contracts, because I have no idea how far down this will go. It could be 20% down. Keeping on with the averaging to try to get to BE would have me so overexposed that there's no point.

You and I see things differently is all.

Sorry your offside a bit on these trades, Overnight.
I was looking at your chart, wasn't your initial average done on weak structure? (Using your chart).

You must devise a way of looking at the market that allows you to: buy/strength, sell/weakness.
You were buying weakness (as defined by your chart, at the moment of execution), in realtime.

The reason why @volpri is doing well currently is he is, in realtime, buying/strength and selling/weakness. AND, as the market pays him, he continues to average, up!

This is why I advocate only average into a trade that is paying you.
I mean anyone can screw the initial entry up, but then to make it worse by averaging down, I just don't understand that.

Structure aside, sentiment at the moment is really unstable.
Trump-China and Trump-Impeachment/US politics are making things very difficult for traders.
There is far to much going on if you ask me. It pays to be extra cautious currently IMHO.

Anyway, I hope this trade settles down and works out for you.

 

[sstheo]

I got some good long scalps this morning on the MYM:

Even though I was below the downtrend line, the market was down significantly from the overnight highs, and I saw that the buyers had been strong down in this area the past two days. And I noticed that my 50 sma on my 5 tick range bar (line chart) was starting to level off. So I jumped in.

But notice I didn't stick around too long. In each case I left ticks on the table, but that is the beauty of scalping. I don't care! I know the next trade will be along in just a few minutes (or less!).