Reducing impact of bad trades.

[DrEvil]

Quote from knocks420:

Use limit orders and scale in, use appropriate starting price and retracement based on type of catalyst, movement, individual stock characteristics, etc. Simple yet deadly....

The problem with scaling in is that when the price moves strongly with little or no retrace then your size is at it smallest, and vice versa, when price goes in the opposite direction taking out all your stops you will have your maximum size on the line.

I have been adding my full size at the beginning and setting 2 stop levels 1)1st stop half way where i exit half of position 2)2nd stop at point where i consider the trade to have failed where i exit the other half. Does anyone else do this? What experience have you had?

 

[c.chugani]

Quote from DrEvil:

The problem with scaling in is that when the price moves strongly with little or no retrace then your size is at it smallest, and vice versa, when price goes in the opposite direction taking out all your stops you will have your maximum size on the line.

I have been adding my full size at the beginning and setting 2 stop levels 1)1st stop half way where i exit half of position 2)2nd stop at point where i consider the trade to have failed where i exit the other half. Does anyone else do this? What experience have you had?

If it works for you, then that is all that matters.

Your method is good since you are basically cutting your losses by half once price starts to move against you. The problem is, you have to time your entries good, otherwise a retracement will mean you would bail out half the trade too soon.

I have been experimenting with putting on HALF my initial size, and then, where I would normally put my original stop loss, add another HALF to reduce my costing. Obviously, I keep a stop at an even lower level, so that if the market continues to move against me, I am stopped out at my predefined max loss level. Anyone try this technique?

 

[ProfitTakgFool]

Just my belief, a trading system that does not use money managment is an inferior system. If the odds go up the contracts go up. That steers you in the direction of having a razor sharp edge but you <b>must</b> have a edge before you ever increase your line.

 

[DrEvil]

Quote from ProfitTakgFool:

Just my belief, a trading system that does not use money managment is an inferior system. If the odds go up the contracts go up. That steers you in the direction of having a razor sharp edge but you <b>must</b> have a edge before you ever increase your line.

On my best looking setups I risk 3%, on a lower timeframe than my preferred 1 or 4 hour charts, (say 15minute) I will risk 0.5% to 1%. Is this what you mean?

 

[John Paterson]

Quote from ProfitTakgFool:

Just my belief, a trading system that does not use money managment is an inferior system. If the odds go up the contracts go up. That steers you in the direction of having a razor sharp edge but you <b>must</b> have a edge before you ever increase your line.

Absolutely correct!

John