Position sizing and adding to winners.

[Hotcakes]

This is different than pyramiding, I am managing each scale-in independently of the prior trades. Each trade has to have a lower risk entry point & has to be profitable or it will get cut - regardless of how much unrealized I have from prior scale-ins.

Your typical pyramid scheme is you add on when your up by a certain amount, & repeat - I think that is a good way to turn a winner into a loser .


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I do the same exact same thing you do.

Another problem with trading is the Tower of Babel effect etc.

 

[Laissez Faire]

Thank you for your comments, bitstream_ryder.

This is usually because the longer the trend has been in place, the greater the chance a squeeze, correction ect...will take place and impact the outcome.

This method definitely works better before 2010(approx) and trend length seems to be getting shorter and less frequent in today's context. You can back-test the turtle trading strategy which i think is conceptually similar to yours to convince yourself.

For sure - in order for this to work, you do need a strong and continued trend where your initial entry is somewhat early.

Mind you - the add-ons does not need to be very wide apart either.

It could be as simple as entering on the breakout - then adding on the pullback to the breakout if it happens.

 

[Laissez Faire]

Scaling in to winners for me is based entirely from price/volume action. I don't factor in probabilities, predictions, or confidence in the trade. I only care about having asymmetrical risk-to-reward, the reward is based on direct market feedback - the open profit.

I add on when I first have a substantial running profit & a healthy correction develops with constricting price/volume. My stop will get me out with a profit, it's just a matter of letting the profit run or hitting the stop - either way the position will be a win.

Leveraging profits to have the potential in making larger gains without increasing risk is the sweet spot in trading. When price/volume is making a strong trending move is the ideal condition to be most active in scaling into.

Good comments, @comagnum.

I couldn't help notice you were posting a 15 second chart. Is that something you typically use for day trading?

Do you trade mostly stocks or futures too? I seem to remember seeing you mention trading NQ in the past.

 

[Laissez Faire]

This is different than pyramiding, I am managing each scale-in independently of the prior trades. Each trade has to have a lower risk entry point & has to be profitable or it will get cut - regardless of how much unrealized I have from prior scale-ins.

So, your basic add-on sequence is basically a string of independent trades, right?

 

[comagnum]

I couldn't help notice you were posting a 15 second chart. Is that something you typically use for day trading?

Do you trade mostly stocks or futures too? I seem to remember seeing you mention trading NQ in the past.

The 15 sec chart I use only at times, the price % move was so large that the only way to fine tune the entries was on the 15 sec chart, I focus on mainly larger time frames to manage trades - 3 min up to 60 min & will only take trades where its at a multi week or month high/low.

I trade mainly futures as my staple, but to keep things interesting I rotate accts I have with different brokers, trading stocks once or twice a week.

 

[Laissez Faire]

The 15 sec chart I use only at times, the price % move was so large that the only way to fine tune the entries was on the 15 sec chart, I focus on mainly larger time frames to manage trades - 3 min up to 60 min & will only take trades where its at a multi week or month high/low.

I trade mainly futures as my staple, but to keep things interesting I rotate accts I have with different brokers, trading stocks once or twice a week.

Sounds good, comagnum. Thanks for sharing your input. It's always interesting.

 

[Laissez Faire]

I've been doing this with some success so far, but normally I prefer to go all in/out. One time last week when I was caught in a bad entry with 1 contract, but kept my calm and realized I was most likely caught inside a pullback before take off.

Price went against me by 6 points. Do not add to a loser or average down on lower prices.

But I mapped out a plan for how I could take advantage if price moved higher as clearing out that deep pullback would convince me we'd make a push higher towards my original target. I had one add placed just above my original entry and a final add on a subsequent buy signal.

Nice.

But most of the time I'm all in/all out with my initial risk moderately small. Keeping risk small for now gives me some flexibility.

Since my initial risk is small, I've been contemplating if doubling down could be used as a tactic too. I'm sure this may be a controversial topic, but I'm thinking if an experienced trader is able to keep his cool and initial risk is small - then doubling down can be used successfully as long as you stay within your maximum risk per trade and daily loss limit.

Simple example:

You're down 2 x 5 points on 1 contract for a gross loss of 10 points.

Double down your next trade by entering with 2 contracts (or add to a winner for a total of 2 contracts). 5 points profit and you're made whole again. Excluding fees.

Thoughts?

 

[trdes]

I've been doing this with some success so far, but normally I prefer to go all in/out. One time last week when I was caught in a bad entry with 1 contract, but kept my calm and realized I was most likely caught inside a pullback before take off.

Price went against me by 6 points. Do not add to a loser or average down on lower prices.

But I mapped out a plan for how I could take advantage if price moved higher as clearing out that deep pullback would convince me we'd make a push higher towards my original target. I had one add placed just above my original entry and a final add on a subsequent buy signal.

Nice.

But most of the time I'm all in/all out with my initial risk moderately small. Keeping risk small for now gives me some flexibility.

Since my initial risk is small, I've been contemplating if doubling down could be used as a tactic too. I'm sure this may be a controversial topic, but I'm thinking if an experienced trader is able to keep his cool and initial risk is small - then doubling down can be used successfully as long as you stay within your maximum risk per trade and daily loss limit.

Simple example:

You're down 2 x 5 points on 1 contract for a gross loss of 10 points.

Double down your next trade by entering with 2 contracts (or add to a winner for a total of 2 contracts). 5 points profit and you're made whole again. Excluding fees.

Thoughts?

Just comes down to the same thing can you consistently follow your plan or not. Average down is not inherently bad, for example if nothing in your setup has changed and you buy at a lower price, that's a good thing not a bad thing.

But averaging down on a "loser" often gets you out of a trade at BE or even for profit, so that's where it can become a bad habit and take people out, but that's only because they didnt have an actual plan or didn't have the mental fortitude to follow their plan.

 

[Evgeniy]

It depends on where the emphasis of your system and your style is shifted. What do you earn: high probability or high RR. If your system is trending (high RR and low %+), then it is advisable to consider additional purchases. If the system is sharpened by probability (low RR and high %+), then the use of additional purchases is harmful. ES is not a trending tool.

 

[Laissez Faire]

Just comes down to the same thing can you consistently follow your plan or not. Average down is not inherently bad, for example if nothing in your setup has changed and you buy at a lower price, that's a good thing not a bad thing.

But averaging down on a "loser" often gets you out of a trade at BE or even for profit, so that's where it can become a bad habit and take people out, but that's only because they didnt have an actual plan or didn't have the mental fortitude to follow their plan.

Yes. It all probably boils down to having a plan.

Regarding averaging down - it's not something I'd want to do. At least not now. I know there's people who claim to do it successfully, but to me it seems similar to selling options premium, i.e., it works until it doesn't.

But if you have a very well thought out plan that you respect. Maybe?