I don't think Xela, or any other skilled trader, would do so based on nothing more than today's profits. However, as I mentioned above, if the 2nd trade is based on one of your setups that develops later in the trend, it's based on your plan just as the 1st trade was. And that would not be gambling, would it?
Pyramiding: Playing with the market’s money
- Thread starter vivaskyliska
- Start date
In theory - yes
In real life, it is almost impossible to say if the market is trend or range bond. You can only know the market is trend or range from hindsight.
Ask yourself a simple question, what is the current trend of EUR/USD ? If you ask 100 traders, you will get mix answers between range bond and trend up/down. This is the beauty and beast of trading.
Robert Morse
Sponsor
Maybe gambling was not the best term. My bad. Let’s look at it differently. You start with a $100,000 DT Account. Have a great morning and up $2500 by 11am. Not bad. If you double your risk on the next trade by doubling your allocation, that does not make good risk management sense to me. As your account is 2.5% higher, I don’t see the sense in doubling your risk with an account that is only 2.5% higher. The mentality of house money does not sit well with me. After the trade is closed, it’s your money, not the “house.”
Bob
No, no. Study, research, and hard work will enable you to determine that in real time.
But at the same time you could look at the trades as being separate. The first trade is showing a profit and the trend is showing no signs of changing, so no reason to exit. Now, a second trading opportunity in the same direction as the first trade presents itself, being a setup based on your plan, and not just bc you're up for the day, and is one that you would take even if you hadn't entered the first trade.
Robert Morse
Sponsor
Agreed. I’m not talking about adding to a good trade or scaling in. That all should have been part of your plan. I’m taking about exceeding your limits just because your are up money.
If my limit is long/short 5 ES future’s, I should not do a 10 lot even with a short stop just because I just made $2500, in my other example.
There is no reason why we all have to agree on this. I was always a very conservative Trader. That’s why today I’m not rich and retired in Florida. It’s also why I’m not broke living with my parents. When I look at the X traders that I know there is a much higher percentage of them that are broke today. Risk management. Proper trade size to my account. Hitting lots of singles and doubles and never going for home runs.
To me this is the way to run a business that survives and thrives over the long run.
OK, if you were referring just to having too many of your eggs in one basket, agreed!
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I seriously doubt that 100 skilled traders could fail to agree which it is.
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A market is trending if its trending in your chosen timescale for a trend-following trade. Its also ranging - potentially simultaneously - if its ranging in your chosen timescale for range trading. As long as you have clear rules for each, no problem.
Trends are the easiest chart pattern to recognise and define. They're therefore inherently the most reliably traded. So many chart set-ups such as ranges, triangles and H&S etc. have an inherent measurable limit beyond which price in its continuation or reversal mode is very unlikely to travel. So profit is automatically going to be limited from the very outset. Whereas a trend can simply continue: as can the profits.
Is the quantitative idea that every new time point along the trend increases probability of next one being along the trend? Thus adding to the new trade has improved probability of success?