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Position Sizing - How to Add to a Winning Position
- Thread starter VoodooMMI
- Start date
I prefer to do the opposite. I load up full position on entry, and then scale out.
Why? Because by definition you are getting ever crappier prices if you scale in as the move goes your way. If in a good trend, then this works fine, but I find good trends tend to be the exception, not the rule.
I do get really picky about my entries however, and set tight stops as well. The cost for doing this is I completely miss lots of moves. I do not let this bother me however. The markets are not going anywhere.
Why? Because by definition you are getting ever crappier prices if you scale in as the move goes your way. If in a good trend, then this works fine, but I find good trends tend to be the exception, not the rule.
I do get really picky about my entries however, and set tight stops as well. The cost for doing this is I completely miss lots of moves. I do not let this bother me however. The markets are not going anywhere.
I think you're addressing the problem in the wrong way. If you just add to your position with every increase of x points, you increase your potential for a drawdown if the market moves against you.
What I do is start my position with half my contracts. i then wait for a thrust move to confirm my trade decision. if i get a higher high, i know I'm right on the money. I then wait for the counter swing, which usually pulls back to slightly above my initial entry position. Now I'm ready to add to the position at a good entry price. I look for a few candlesticks showing some tail action - a hammer for instance. Then I add to the position on the way up.
This is more of a touchy feely approach that a mechanical approach, but it allows me to tailor my exposure with my confidence level.
Runningbear
What I do is start my position with half my contracts. i then wait for a thrust move to confirm my trade decision. if i get a higher high, i know I'm right on the money. I then wait for the counter swing, which usually pulls back to slightly above my initial entry position. Now I'm ready to add to the position at a good entry price. I look for a few candlesticks showing some tail action - a hammer for instance. Then I add to the position on the way up.
This is more of a touchy feely approach that a mechanical approach, but it allows me to tailor my exposure with my confidence level.
Runningbear
it all depends on what you trade.
if you trade the trend and enter on pullbacks, you can't really add to positions especially if you daytrade and go for a retest of the previous swing high/low.
however if you trade reversals, adding to winners is essential in building up larger positions.
if you trade the trend and enter on pullbacks, you can't really add to positions especially if you daytrade and go for a retest of the previous swing high/low.
however if you trade reversals, adding to winners is essential in building up larger positions.
i can honestly say that the biggest increases in equity I've recorded have all been through adding to a position that has gone into profit.
Usually if I don't do this, I end up under-committed on big moves.
And if you just add to a position at support or resistance, it's too easy to be over-committed if it goes against you.
Runningbear
Usually if I don't do this, I end up under-committed on big moves.
And if you just add to a position at support or resistance, it's too easy to be over-committed if it goes against you.
Runningbear
Only add to a profitable position if you get another valid trade signal in the same direction.
Simply, do not add solely based upon the winning position reaching a particular price level.
Manage each contract as it they were an independent trade.
Mark
Simply, do not add solely based upon the winning position reaching a particular price level.
Manage each contract as it they were an independent trade.
Mark
http://elitetrader.com/vb/showthread.php?s=&postid=1927780#post1927780
Quote from Cutten:
The first thing to learn about position sizing is that your position size should have *nothing* whatsoever to do with whether your initial entry was a winner, loser, breakeven, or whatever.
The only rational way to position size is based on an assessment of market action up to the present time. Your own buy or sell decisions in the past have NOTHING to do with what the right position is now.
Therefore anyone who pursues a policy of adding to a winner, or cutting a loser, solely because it is a winner or loser, is being totally irrational. A position should only be added to if the current price & odds favour a bigger position. A position should only be cut if the current price & odds indicate that the trade sucks.
More clueless, illogical, irrational nonsensical superstitious bollocks has been written on this than any other subject in the field of trading & the markets.