Position sizing and adding to winners.

[Laissez Faire]

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.

I suppose it depends on who you ask and on what time frame.

Good comment, though. I do agree that most of the time - adding to a winner may not be the best strategy on ES. But it really boils down to targets and strategies.

If you bought near the LOD this morning you could effectively add to your position when the market broke higher. As an example...

 

[high-performance]

maximum loss is 3% preferably 1%

Risk ratio should be at least 1.2. Anything less than 1 is too low and gains won't make up for losses.

cut your losses and let winners ride.

 

[Evgeniy]

I suppose it depends on who you ask and on what time frame.

Good comment, though. I do agree that most of the time - adding to a winner may not be the best strategy on ES. But it really boils down to targets and strategies.

If you bought near the LOD this morning you could effectively add to your position when the market broke higher. As an example...

Inside the day ES is EXACTLY not trendy))

There are two aspects:

1. Technical.
If we consider not single cases, but all days, then trend days on ES, according to my estimates, about 15%. If you compile a risk map for each type of setup, it turns out that the "additional inputs" will have worse parameters than the "initial input". In essence, you are financing a bad matrix {RR ratio; probability %+} of "additional inputs" from the “initial entry”. You do not consider the floating profit in the transaction to be yours. And how is it different from your deposit? If you separate the flies from the cutlets and calculate separately the statistics on the "additional inputs", their risks and usefulness, then they will be much worse than the "initial input".

2. Psychological.
In manual trading, the main problem is stability over a long distance. It completely depends on your brain. The greater the amplitude of the fluctuations in profit and loss, the higher the chances of falling into tilt. If the brain gets used to thinking and acting according to the logic of trends and supplements, then it will feel bad in 85% of days when there are no trends. As a result, there will be no intelligible algorithms of action in the head; the market assessment will be violated. The advantage that is now is lost.


Indeed, one very profitable trade will not solve your strategic task of trading on the exchange. And each dollar of floating profit not taken or put into unproductive experiments is the theft of one of the happy future in which we would like to live, the future for which we spend so much time on the exchange.

I do not dissuade you from your venture, everyone has their own path. But they already wrote above: "the most optimal entrance is immediately to the full size with phased unloading."

 

[Laissez Faire]

Inside the day ES is EXACTLY not trendy))

There are two aspects:

1. Technical.
If we consider not single cases, but all days, then trend days on ES, according to my estimates, about 15%. If you compile a risk map for each type of setup, it turns out that the "additional inputs" will have worse parameters than the "initial input". In essence, you are financing a bad matrix {RR ratio; probability %+} of "additional inputs" from the “initial entry”. You do not consider the floating profit in the transaction to be yours. And how is it different from your deposit? If you separate the flies from the cutlets and calculate separately the statistics on the "additional inputs", their risks and usefulness, then they will be much worse than the "initial input".

It really depends on how you define a trend day. If we look at 'up days' strictly, approximately 54 % open near the bottom and close near the top of the range. Can there be deep pullback in between? Sure.

If we look at days with only one major swing - that's pretty much 25 % of all trading days.

Regardless, I feel this is a bit besides the initial discussion.

If you add to a winner - it does not necessarily mean your entries are miles apart.

I do not dissuade you from your venture, everyone has their own path. But they already wrote above: "the most optimal entrance is immediately to the full size with phased unloading."

Are you here suggesting to scale out of winners?

 

[Evgeniy]

It really depends on how you define a trend day. If we look at 'up days' strictly, approximately 54 % open near the bottom and close near the top of the range. Can there be deep pullback in between? Sure.

If we look at days with only one major swing - that's pretty much 25 % of all trading days.

Regardless, I feel this is a bit besides the initial discussion.

If you add to a winner - it does not necessarily mean your entries are miles apart.



Are you here suggesting to scale out of winners?

We have different concepts - you want big profits, I want small losses. You are ready to sacrifice floating profit during the correction, but for me there is no difference where I give part of my deposit - either immediately after entering or from the current profit for correction.

Now I do not know how to constantly enter the ES with RR = 3 or more. I cannot so well anticipate the behavior of other participants. Maybe I'll learn later. This is not the main thing for me. My goal is different - to maximize profits. And this can be done in ES through building up the size. And for this it is necessary to reduce drawdowns. And answering your question: I don’t know what my “winner” will be the “winner” in a series of 1000 transactions. But, if the “additional entrance” has a better risk map than the “first entrance”, then why not skip the “first entrance” and go into the additional one as the first?))

 

[Laissez Faire]

We have different concepts - you want big profits, I want small losses. You are ready to sacrifice floating profit during the correction, but for me there is no difference where I give part of my deposit - either immediately after entering or from the current profit for correction.

I want both big profits and small losses.

But, if the “additional entrance” has a better risk map than the “first entrance”, then why not skip the “first entrance” and go into the additional one as the first?

The market is dynamic.

You may for example enter long on a breakout, but the evolution of the trade is uncertain. It can be a fake breakout or it can pick up momentum. If the latter, you miss out by not taking your first signal.

Let's say price pulls back towards the breakout point and your entry. If you get another buy signal here you take this as an additional long signal and may add one more unit. Now you're effectively long two units with increased certainty as price validated your long hypothesis.

Or you may simply already be in an existing position where you get another strong continuation signal in your direction.

I'm not sure how you trade, but if you're scalping for ticks, then adding to winners is probably not the way to go. I agree on that.

 

[Evgeniy]

I want both big profits and small losses.



The market is dynamic.

You may for example enter long on a breakout, but the evolution of the trade is uncertain. It can be a fake breakout or it can pick up momentum. If the latter, you miss out by not taking your first signal.

Let's say price pulls back towards the breakout point and your entry. If you get another buy signal here you take this as an additional long signal and may add one more unit. Now you're effectively long two units with increased certainty as price validated your long hypothesis.

Or you may simply already be in an existing position where you get another strong continuation signal in your direction.

I'm not sure how you trade, but if you're scalping for ticks, then adding to winners is probably not the way to go. I agree on that.

Of course I wish you success in our hard business. But I definitely know two things:
1. In the case of the “entry to the breakthrough and the addition” described by you, you begin to bear double risk from one market situation. You with such a strategy cannot increase your profit potential at the initial risk. Your risk is just doubled. You do not shift the risk map in your direction. Moreover, you exacerbate the situation by putting two units of risk per situation in one instrument in comparison with diversification (when parts of the risk are placed on different poorly correlated instruments and different situations).
2. After the initial entry, when the price moves to your take profit, the risk map is getting worse and worse. The closer to take, the higher the likelihood of correction with an unknown depth or reversal, and the potential for additional profit falls. That is, in the case of a “winner”, as you move in your direction, RR and probability %+ fall exponentially. Paradoxically, in a good deal, as it develops, the risk map worsens and gradually "the carriage turns into a pumpkin."

In addition, there is another important aspect - our brain perceives the negative and positive events of the past asymmetrically. And even more asymmetrically predicts future probabilities.

 

[Laissez Faire]

1. In the case of the “entry to the breakthrough and the addition” described by you, you begin to bear double risk from one market situation. You with such a strategy cannot increase your profit potential at the initial risk. Your risk is just doubled. You do not shift the risk map in your direction.
Moreover, you exacerbate the situation by putting two units of risk per situation in one instrument in comparison with diversification (when parts of the risk are placed on different poorly correlated instruments and different situations).

Not really. The whole point of adding to a winning trade is that you reduce risk on your initial entries.

After a successful breakout and subsequent test of that breakout - you can trail your stop on your 1st entry to breakeven such that your 1st unit is essentially risk-free.

I see that I already showed a simple example with 3 add-ons:

Position sizing and adding to winners.

 

[Evgeniy]

Not really. The whole point of adding to a winning trade is that you reduce risk on your initial entries.

After a successful breakout and subsequent test of that breakout - you can trail your stop on your 1st entry to breakeven such that your 1st unit is essentially risk-free.

I see that I already showed a simple example with 3 add-ons:

Position sizing and adding to winners.

Yes, I saw your circuit. Thank.

The fact is that you do not consider the profit from the first entry as yours. This is already part of your deposit, it does not matter whether you closed the position or not. After a successful breakthrough, you do not close the first part and want more profit. In the first part, you are back in the deal: risk from the current price to the breakeven point, take somewhere there. In the first part, you risk losing profit. This is your loss in the first part. You add the second part in which the risk is tied to the behavior of the same tool in the same situation. So it turns out double risk.

I repeat - our brain loves to deceive us. First, take 100 of these pictures from the past at different phases of the market and calculate what happens. And then start doing it in real time. Your brain at some point will cease to adequately see the market in the moment, and will substitute pictures from the past. Depending on what kind of emotional state you are in now, he will pick up such pictures - either frightening or encouraging. As a result, you will trade the illusions of your brain. For stability at a distance, the brain needs clear instructions and clear algorithms. Only then can you go far and psychologically withstand the burden of a growing account.

 

[murray t turtle]

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.

%%
That can work real well;
depending.
DAL/AAL went bankrupt once + may do it again.So it can work real well, but plenty of traps...……………………………………………………………………………………………………………….