Position sizing and adding to winners.

[Laissez Faire]

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

This is interesting, scaling out/in aside.

Assessing accurate probabilities is not easy anyway. At least not on trade-by-trade basis. But certainly there are trades where the odds seem to stack up better - and as such, these should be taken with the maximum bet size.

Is that what you're doing yourself, wrb?

One could of course argue that one should only be taking these very high probability trades to begin with and discard lower probability trades taken on smaller size.

So, is anyone else varying their bet size according to their belief in the trade or some other criteria?

 

[wrbtrader]

This is interesting, scaling out/in aside.

Assessing accurate probabilities is not easy anyway. At least not on trade-by-trade basis. But certainly there are trades where the odds seem to stack up better - and as such, these should be taken with the maximum bet size.

Is that what you're doing yourself, wrb?

One could of course argue that one should only be taking these very high probability trades to begin with and discard lower probability trades taken on smaller size.

So, is anyone else varying their bet size according to their belief in the trade or some other criteria?

Yeah...its one of the things that I do.

Yet, probabilities change because market conditions change. Thus, a trade strategy that had low probability one year ago and only allowed small position size...today it's success has high probability in current market conditions... allowing it to have larger position size.

Just the same, another trade strategy that had higher probability a year ago and allowed bigger position size...today it may be lower probability in current market conditions...designating it to only small position size.

There's other strategies that use to perform better in market conditions years ago but today they begin performing so bad that it prompts you to revisit your statistical notes about the strategy historical performance...you then realize today's market condition is something you should not be trading.

You then mothball (put away in the closet sort'uv speak) until market conditions change again so that the particular strategy is applicable (profitable).

Another way to look at it. Pretend someone only has just one trade strategy designed for only one type of market condition / price action event. In theory...there should be trading days they shouldn't be getting valid trade signals. These are the traders you hear about that only get a few valid trades per day, per week, per month or per year...sometimes they go for long periods of time without any valid trade signal.

Therefore, if the latter occurs...they're in cash...on the sidelines just waiting for an opportunity to appear.

Then there's those that their trade strategy is so simple that any price action is a valid trade in reference to those that get 100's of valid trade signals per day (e.g. scalpers).

Thus, its more than just probabilities.

Yet, I remember someone here at ET saying their account is so small that they're only able to trade 1 contract. Therefore, position size management is not something that's available to him. I replied...it is available because there will be some market conditions that's not suitable for trading in which you know the stats about your trade strategy that reveals most likely you'll get a trade loss.

That's a market condition your position size should be zero as in you're on the sidelines not trading. Simply, even 1 contract traders can be involved in position size management when the risks of trading are changing.

wrbtrader

 

[easymon1]

So, I entered long with

Hat's off to you sir.
a method to the madness and it becomes a trader's duty to bag that booty.
diji at support~10:25 i, doji at support~11:25 ii, dojis @high and close below the 8ema~13:25 out. that could work.
https://www.elitetrader.com/et/attachments/gc-2020-0409-1400-gc-5m-png.224581/

youtu.be/Y2HKBQMQmbw

https://www.elitetrader.com/et/threads/cardiovascular.335482/

 

[KCalhoun]

I

This is interesting, scaling out/in aside.

Assessing accurate probabilities is not easy anyway. At least not on trade-by-trade basis. But certainly there are trades where the odds seem to stack up better - and as such, these should be taken with the maximum bet size.

Is that what you're doing yourself, wrb?

One could of course argue that one should only be taking these very high probability trades to begin with and discard lower probability trades taken on smaller size.

So, is anyone else varying their bet size according to their belief in the trade or some other criteria?

Great thread, all my trades use position sizing, tips:

I start all trades small and buy $300 - $800 worth of shares. Amount depends on relative strength of chart (like starting hand strength in poker)

I do 15-200 trades per week, both day and swing trading

I add on 2day high breakouts and scale out on 2day lows

I frequently take small stops and re-enter, and often scale out premkt on gap winners

Main strategy is to start 5-15 small positions on breakouts and add to winners by doubling down 2-4 times, eg buy 30shares at $20, add 30 at $22, add 60 at $24, erc

Main goal is to be net profitable on each set of trades. Essential to take lots of shots with tiny stops on losers, I try to keep stops under $100

 

[taowave]

Trdes,of course he is saying (or should be saying) adding to winners has no predictive value for himself...

Because I can not make something work,doesnt mean another trader can not.

More to the point,I would also agree that adding adding to winners(blindly) has no predictive value,and if it does work, it is because the discretionary trader has a unique skill set that I clearly do not have.

IMHO,adding to winners is simply an entry,and and its outcome has nothing to do with ones P and L.The market does not care if I am in the black or red,so the method should stand on its own,and should be easily simulated....

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?

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?

 

[trdes]

Trdes,of course he is saying (or should be saying) adding to winners has no predictive value for himself...

Because I can not make something work,doesnt mean another trader can not.

More to the point,I would also agree that adding adding to winners(blindly) has no predictive value,and if it does work, it is because the discretionary trader has a unique skill set that I clearly do not have.

IMHO,adding to winners is simply an entry,and and its outcome has nothing to do with ones P and L.The market does not care if I am in the black or red,so the method should stand on its own,and should be easily simulated....

I am not sure if you actively read a lot of post on here but people jump to making conclusions for EVERYONE and not just themselves all the time. Of course he shouldn't be making a blanket (negative) statement that speaks for everyone WITHOUT some type of positive proof, but people often do it anyways. Again ,for the third time that is why I was clarifying so I could avoid having all these long back and forth's which it's quite apparent I failed miserably at my goal because that clarification has turned into me responding to everyone responding on his behalf. Maybe it's me that's not getting that part of it since this is now the third time I've addressed it.


Outside of that It's 100% factual that some people do have a mathematical edge in the markets on setups beyond 50%. So, that being a fact that most edges or at the very least all the ones from the successful traders I know are obtained by either "X" amount of price movement, momentum over time and/or the velocity of the movement, than why is it so hard to think that you can't get a secondary signal within a move that gives you a mathematical edge to add to a winner OR "loser". I use loser in quotes because it seems a lot of people go into panic mode if the position goes against them, which is one of the sure fire ways to guarantee you'll never be successful.

I understand and appreciate a lot of people don't have huge amounts of capital to with stand draw downs, but that's just a brutal honest fact of the markets that the tighter your stop is, in general the more difficult it will be for you to successfully and consistently turn a profit everyday because you'll need an even bigger, tighter edge and have less options and flexibility on your trades and trading strategies.

 

[taowave]

It's you

The poster stated the obvious,and IMHO misinterpreted where he was going with it..

"The information that THIS trade is winning (or losing for that matter) has ZERO predictive value."

I am not sure if you actively read a lot of post on here but people jump to making conclusions for EVERYONE and not just themselves all the time. Of course he shouldn't be making a blanket (negative) statement that speaks for everyone WITHOUT some type of positive proof, but people often do it anyways. Again ,for the third time that is why I was clarifying so I could avoid having all these long back and forth's which it's quite apparent I failed miserably at my goal because that clarification has turned into me responding to everyone responding on his behalf. Maybe it's me that's not getting that part of it since this is now the third time I've addressed it.


Outside of that It's 100% factual that some people do have a mathematical edge in the markets on setups beyond 50%. So, that being a fact that most edges or at the very least all the ones from the successful traders I know are obtained by either "X" amount of price movement, momentum over time and/or the velocity of the movement, than why is it so hard to think that you can't get a secondary signal within a move that gives you a mathematical edge to add to a winner OR "loser". I use loser in quotes because it seems a lot of people go into panic mode if the position goes against them, which is one of the sure fire ways to guarantee you'll never be successful.

I understand and appreciate a lot of people don't have huge amounts of capital to with stand draw downs, but that's just a brutal honest fact of the markets that the tighter your stop is, in general the more difficult it will be for you to successfully and consistently turn a profit everyday because you'll need an even bigger, tighter edge and have less options and flexibility on your trades and trading strategies.

 

[trdes]

It's you

The poster stated the obvious,and IMHO misinterpreted where he was going with it..

"The information that THIS trade is winning (or losing for that matter) has ZERO predictive value."

He is not using this as singular, his statement still makes it sound like he is using this as plural, because he stated that he stopped doing it all together, if he's just talking about a singular trade, why would he state he stopped doing it all together?

Besides that, great let's say I am wrong on that. What good does that do you, me or him? absolutely nothing. That doesn't change the fact that there can be an advantage and edge to adding to a trade and if you think otherwise I am letting you know that you're factually incorrect. If anyone doesn't believe me than I'll just have to live with that.

 

[KCalhoun]

Most of my biggest winning trades this past decade have been swing trades I scaled into.

I view trades as a sequence of 2-3 events. The MAIN purpose of an initial small 30share position is to test a breakout idea and to be the first of several trades in a row for that specific stock or ETF, if it continues up.

I call those 'pilot' trades, when some stop out, it's very inexpensive.

When some win, I'm playing with the house's money and start scaling up. It's all a numbers game

 

[comagnum]

So, is anyone else varying their bet size according to their belief in the trade or some other criteria?

Varying bet sizes while keeping the max trade risk <1% of capital, even on the fat pitches. Scaling in/out with half or thirds whenever possible, if price action supports it.

My trades are volatility adjusted, reward-to-risk is the main factor.

Adding only to winners. The smallest position size is on the losers & largest on the winners (math edge 101).

Most traders choke off their profits and feed their losers, reverse this and your on the way.