Position sizing and adding to winners.

[tomas262]

Foolly in, foolly out ... keep it as simple as possible and consistent which leads to more stable results

I have experimented a lot with adding to winners and experienced huge equity ups and downs. I stopped because I realized it does not make any sense. The information that THIS trade is winning (or losing for that matter) has ZERO predictive value.

 

[trdes]

Foolly in, foolly out ... keep it as simple as possible and consistent which leads to more stable results

I have experimented a lot with adding to winners and experienced huge equity ups and downs. I stopped because I realized it does not make any sense. The information that THIS trade is winning (or losing for that matter) has ZERO predictive value.

I just want to clarify your statement if I may:

You do mean that it has ZERO predictive value for YOU correct? You're not claiming that adding to a winner or a loser has ZERO predictive value to everyone correct?

 

[Sekiyo]

I just want to clarify your statement if I may:

You do mean that it has ZERO predictive value for YOU correct? You're not claiming that adding to a winner or a loser has ZERO predictive value to everyone correct?

He’s saying that ...
It’s not because a trade moved into your favor,
That it will move farther into your favor.

But even then I kind of disagree.
Because price has path dependence, memory.
It’s not a perfect random walk down Wall Street.

 

[wrbtrader]

Hi all,

Happy Easter!

I'd be curious to hear from (day) traders what your approach is with regards to position sizing.

Do you keep it fixed at say 1-2 % per trade or do you have another approach?

Generally, I've always used a fixed position size throughout the day in relation to my capital, but lately, I've experimented a bit with both varying position size and adding to winners.

For me, this may mean trading with my smallest size early in the morning, but increasing size and/or adding to a winning trade as/if my confidence increases.

I haven't fully worked it out yet, but can use yesterday as an example. I had a strong long bias prior to the Open, but still, due to poor execution I managed to start the day in the red for a small drawdown. However, as the opening session progressed, I became increasingly confident that I was stopped up prematurely and I kept getting buy signals to support my thesis.

So, I entered long with the same size and double up with twice the size at a slightly higher level, effectively adding to a winning trade. This trade paid for my early loss and then some.

I know some people like to average down too, but I don't think I'm interested in trying that. I'd rather stop myself out then and get back in at the same or a better price.

Thanks in advance for any comments here.

Each trading day is never the same nor the price action that the trade signal appears within.

Simply, position size management for each trade should not be the same because to be the same is to imply the price action is always the same.

Last of all, position size does not only imply averaging into trades. It becomes more complicated if you're using more than one trade strategy. Therefore, you should then realize that each trade strategy will have different probabilities for success.

Thus, obviously you would not use the exact same position size for all your trade strategies unless they all have the exact same probabilities.

wrbtrader

 

[trdes]

He’s saying that ...
It’s not because a trade moved into your favor,
That it will move farther into your favor.

But even then I kind of disagree.
Because price has path dependence, memory.
It’s not a perfect random walk down Wall Street.

I understand exactly what he's saying as far as concept. I am asking him to clarify if he's saying if it has ZERO predictive for himself or if he's trying to claim that it's ZERO predictive value to everyone.

 

[Overnight]

I understand exactly what he's saying as far as concept. I am asking him to clarify if he's saying if it has ZERO predictive for himself or if he's trying to claim that it's ZERO predictive value to everyone.

It is zero predictive value for everyone. Scaling into or out of a position predicts nothing. Luck of the draw, man.

 

[trdes]

It is zero predictive value for everyone. Scaling into or out of a position predicts nothing. Luck of the draw, man.

No it isn't and I factually know it isn't. Once again you're the second person to answer not only a question I didn't ask, but also a question that I was asking someone else as only they can clarify their statement, unless you're a mind reader.

Of course "scaling into or out of a position predicts nothing" on face value is a fair statement if you're just doing it to do it with no reason or math behind it.

How long have you been trading full time successfully or how many day traders do you know(factually you've seen verifiable proof) that have been successful for years and decades?

I genuinely don't understand why you aggressively answer questions with negatives. I've never seen you give any proof positive attached to your answers. I am not asking for the world , statements or anything like that but you give no market examples, no explanations and you never mention anyone you know who's successful or etc (this is why I ask). It's just straight out of the gate "luck of the draw".

 

[Overnight]

No it isn't and I factually know it isn't. Once again you're the second person to answer not only a question I didn't ask, but also a question that I was asking someone else as only they can clarify their statement, unless you're a mind reader.

Of course "scaling into or out of a position predicts nothing" on face value is a fair statement if you're just doing it to do it with no reason or math behind it.

How long have you been trading full time successfully or how many day traders do you know(factually you've seen verifiable proof) that have been successful for years and decades?

I genuinely don't understand why you aggressively answer questions with negatives. I've never seen you give any proof positive attached to your answers. I am not asking for the world , statements or anything like that but you give no market examples, no explanations and you never mention anyone you know who's successful or etc (this is why I ask). It's just straight out of the gate "luck of the draw".

Jesus, man! It's a straight-forward concept. If you have a position in an instrument, adding into your position does not mean that the instrument will then go up or down...? What "predictive power" can scaling in or out of a position possibly have? Unless you are a market-maker and are doing millions of shares in a stock on any given day. Then yeah, I guess you can make a stock move.

*shrugs* Sorry I tried to imply some logic here. Remember, I trade single lots, not billions of shares at a time.

 

[trdes]

Jesus, man! It's a straight-forward concept. If you have a position in an instrument, adding into your position does not mean that the instrument will then go up or down...? What "predictive power" can scaling in or out of a position possibly have? Unless you are a market-maker and are doing millions of shares in a stock on any given day. Then yeah, I guess you can make a stock move.

*shrugs* Sorry I tried to imply some logic here. Remember, I trade single lots, not billions of shares at a time.

Ok I don't want to debate just to debate. If you're trading a single micro mini, I completely appreciate and understand where you're coming from.

But from an overall perspective adding to a trade winner or loser can actually greatly improve your probability of a successful trade (if you have an actual plan with it I am not advocating averaging down or up just to do it ).

For example let's say someone is trading one regular ES contract. It's exponentially way harder to turn a consistent profit on a single entry and exit, than if they were to divide that ES contract into 10 micro mini's and make a strategy that involves multiple layering.

That gives you an option to trade more like people who do trade billions of shares. Someone who is trading size doesn't just press buy on their entire order right? they would be potentially pricing themselves out by pushing the market up higher as they buy. They don't do that they have a target number of price they want and they leg into a position to get a net weighted average.

So not only would you take on less risk by layering it you could substantially improve your average, which could also increase your net profit on your trade.

This is just one example of adding to a trade, it's not even touching on the fact that it is possible after "x" amount of movement that the probability of adding to a trade actually increases your odds of it being more successful or profitable as momentum does begat momentum.

 

[Overnight]

...

That gives you an option to trade more like people who do trade billions of shares. ...

NO