with an indicator that (kind of) points out tops and bottoms in real time, position sizing? (pics)

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IronFist

Ok guys, imagine you have an indicator that locates these points in real time. It's not perfect 100% of the time, but may be close enough with proper position sizing. This is from 6/26/18 ES btw.

Where should we enter? Is it safe to say you can start with a few positions and reliably contribute size since it's occasionally not at the bottom but close? And then have a hard stop a few points away?

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IronFist said:
Ok guys, imagine you have an indicator that locates these points in real time. It's not perfect 100% of the time, but may be close enough with proper position sizing. This is from 6/26/18 ES btw.

Where should we enter? Is it safe to say you can start with a few positions and reliably contribute size since it's occasionally not at the bottom but close? And then have a hard stop a few points away?

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Yes, I use an indicator which does that automatically to point to the opportunities. Then the scaling is a matter of risk and size of account as well as trade duration.
 
For most any signal, I favor placing a buy stop just above the bar that created the long signal or a sell stop just below the bar that created the short signal. That forces the market to prove that it still has momentum in the right direction and keeps me out of about 1/2 of the bad signals.
 
@MoneyMagnet what about beginning a long position at that candle and a few points below so if price reverses you have a huge position in the right direction?

And since you're adding more as price goes against you, your maximum loss only has big size for a few points max.
 
Like, signal at 500.

Long at start of next candle the earliest possible entry.

More at 499.

More at 498.

More at 497.

Out at 496. If your signal was roughly at the reversal you'll make money, maybe a lot.
 
That would not be something I would ever do. First of all, I'm looking for a stock to be moving in the direction I'm trading - need to have momentum already in place. If you want to go North, why jump on a train that's going South?
As for adding more as it goes down, that's like trying to catch a falling knife. Generally quite painful. In the train analogy, it's like jumping on the train going South, then when it's gone the wrong way a little, you tell your wife to jump on with you. Then it goes further South and you have your kids jump on. Soon you will need to ask yourself "Why am I on a train that's going the wrong way?" Or more importantly, "Why did I have my whole family get on when I knew that the train was going the wrong way?"

Another term for this is "averaging down", and in the immortal words of Mark Minervini (quoting the immortal words of Paul Tudor Jones): "Losers average losers".
 
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