Quote from tlow:
At that point, aren't you just doing that to satisfy your nerves? IMO, your original entry wasn't as good as your original analysis so you as the trader made the error...it seems like you are trying to make an improperly defined entry point work.
Ok...for arguements sake, now where and when do you move a stop to B/E, if at all? Or do you move up/down your original stop to the offset point of where you just scaled out?
You are moving up or down your pricing point, but you still run into the same set of circumstances just with a little bit better price.
If price happens to wiggle around a lot, I think you would be in and out too much.
Thoughts?
As someone else said, comes down to outstanding record keeping, and knowing your "MAE," Maximum Adverse Excursion.
Normally, shorter timeframes will produce higher winning percentages but have to accept smaller profits, such as in Scalping - if you designed it right, as timeframe becomes larger, winning percentages go down and hopefully profits become larger.
I risk 10 tics with my targets being 4-20 tics, but more times than not, I grab 4-5 tics. The only reason I use a stop at all is for
Catastrophic reasons, very seldom do I allow that stop to be used. Now, since I have done thousands of trades, I have a huge amount of data I can review to see how many tics against the trade it has gone before turning around to be either a winning trade or to get out at breakeven. Most will tell you never Average down, but that is exactly what I do, I will get into a trade one tic worse from where I want to enter, wait for price to come to perfect entry, and have another entry 5 tics even lower for longs. Each entry has same stop price. So if trade becomes profitable, I make 5 more tics, if I need to get out at breakeven stop of perfect entry, trade comes out net plus 4 tics. And occasionally I lose the extra tics, but the way I see it, any time I can come ahead on a breakeven trade, I am ahead.
I have eight different "patterns" that I wait for, seven of them are waiting for price to come to my limit order, so that also means, each had to go thru backtesting to find the best "MAE" to Average down.
One of the biggest problems that never crossed my mind when I was first starting, the better your record keeping, the better you can fine tune your trading. Just like using "MFE" Maximum Favorable Excursion, finding the best place to use as your first target.
I scale out of my position if price is really ripping, but I take off 80% at first target, I am not a homerun type trader, maybe once a week I will get 5pt in ES per week, but it is on only a couple contracts.
As far as when to go to breakeven, there are many factors to be considered, your timeframe, whether it is a breakout entry or deep retracements. Perhaps you might notice that most of your winning trades allows you to get in and price never comes back to your entry, what does your records say about duration of winning trades? Perhaps after so much time, you go to breakeven stop, or breakeven plus one tic. Go to breakeven when first target is made, or new high/low is made for that area. There are literally several ways to tighten up protective stops, time, price and sometimes volume.
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