Add to a trade - futures io
futures io futures trading



Add to a trade


Discussion in Psychology and Money Management

Updated
      Top Posters
    1. looks_one Myshkin with 9 posts (10 thanks)
    2. looks_two baruchs with 8 posts (12 thanks)
    3. looks_3 Delta_Panther with 4 posts (1 thanks)
    4. looks_4 whatnext with 4 posts (4 thanks)
      Best Posters
    1. looks_one baruchs with 1.5 thanks per post
    2. looks_two josh with 1.3 thanks per post
    3. looks_3 Myshkin with 1.1 thanks per post
    4. looks_4 whatnext with 1 thanks per post
    1. trending_up 5,408 views
    2. thumb_up 41 thanks given
    3. group 8 followers
    1. forum 36 posts
    2. attach_file 0 attachments




Welcome to futures io: the largest futures trading community on the planet, with well over 125,000 members
  • Genuine reviews from real traders, not fake reviews from stealth vendors
  • Quality education from leading professional traders
  • We are a friendly, helpful, and positive community
  • We do not tolerate rude behavior, trolling, or vendors advertising in posts
  • We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community.  It's free and simple.

-- Big Mike, Site Administrator

(If you already have an account, login at the top of the page)

 
Search this Thread
 

Add to a trade

(login for full post details)
  #1 (permalink)
Switzerland
 
 
Posts: 112 since Aug 2009

Hi

I heard about a strategy : Add to a trade, and then I was searching here and I did not find any thread.

Doe's anybody trade with adding positions to an existing trades or is this just out of question ?

Delta_Panther

Reply With Quote

Can you help answer these questions
from other members on futures io?
Work with historical tcks data on MUltichart NET PowerLa …
MultiCharts
Improve current ZigZag indicator in NT8
NinjaTrader
Reading A set of Trading Signals
EasyLanguage Programming
ZigZag with Depth and Backstep
EasyLanguage Programming
Help Needed: TOS Options Chain IV & IMPL MOVE Calcul …
ThinkOrSwim
 
Best Threads (Most Thanked)
in the last 7 days on futures io
Battlestations: Show us your trading desks!
124 thanks
Big Mike in Ecuador
61 thanks
Want your NinjaTrader indicator created, free?
28 thanks
If you needed one-on-one help with any trading issue, ho …
26 thanks
Selling Options on Futures?
21 thanks
 
(login for full post details)
  #3 (permalink)
Near Dallas, Texas, US
 
Experience: Advanced
Platform: NinjaTrader
Broker: ZenFire
Trading: CL
 
Gary's Avatar
 
Posts: 1,070 since Jun 2009
Thanks: 502 given, 2,234 received



Delta_Panther View Post
Hi

I heard about a strategy : Add to a trade, and then I was searching here and I did not find any thread.

Doe's anybody trade with adding positions to an existing trades or is this just out of question ?

Delta_Panther

Hello Delta_Panther,

I had a similar idea and thread here a while back:


I would also like to add that for me, scaling in and out is very important. I will often start a position and wait for additional signs before adding more. Of course, your statistics, journal, and experience will help you fine tune this over time.

Gary

Visit my futures io Trade Journal Reply With Quote
The following user says Thank You to Gary for this post:
 
(login for full post details)
  #4 (permalink)
Switzerland
 
 
Posts: 112 since Aug 2009


Gary View Post
Hello Delta_Panther,

I had a similar idea and thread here a while back:


I would also like to add that for me, scaling in and out is very important. I will often start a position and wait for additional signs before adding more. Of course, your statistics, journal, and experience will help you fine tune this over time.

Gary

Hi Gary

I will meet you there. Thanks a lot for your reply.

Delta_Panther

Reply With Quote
 
(login for full post details)
  #5 (permalink)
Israel
 
Experience: Intermediate
Platform: NinjaTrader
Broker: pfg
Trading: eminis
 
Posts: 323 since Jun 2009
Thanks: 6 given, 207 received

I'm against scaling in/out. Maybe psychoLOGICALLY its OK, but LOGICALLY its not.
I explained it in a thread almost 2 years ago.

Reply With Quote
The following user says Thank You to baruchs for this post:
 
(login for full post details)
  #6 (permalink)
Switzerland
 
 
Posts: 112 since Aug 2009


baruchs View Post
I'm against scaling in/out. Maybe psychoLOGICALLY its OK, but LOGICALLY its not.
I explained it in a thread almost 2 years ago.

May you post the link to that thread ?

Thank you

Reply With Quote
 
(login for full post details)
  #7 (permalink)
Market Wizard
Quebec
 
Experience: Intermediate
Platform: NinjaTrader wt Rancho Dinero's profiling tools
Broker: AMP/CQG
Trading: ES, NQ, YM
 
trendisyourfriend's Avatar
 
Posts: 3,985 since Oct 2009
Thanks: 3,658 given, 5,126 received


baruchs View Post
I'm against scaling in/out. Maybe psychoLOGICALLY its OK, but LOGICALLY its not.
I explained it in a thread almost 2 years ago.

My Friend Eusebio is doing quite well with his scaling scheme :

The MAX Trading System Example MAX Trades

Reply With Quote
The following 2 users say Thank You to trendisyourfriend for this post:
 
(login for full post details)
  #8 (permalink)
Israel
 
Experience: Intermediate
Platform: NinjaTrader
Broker: pfg
Trading: eminis
 
Posts: 323 since Jun 2009
Thanks: 6 given, 207 received


Quoting 
My Friend Eusebio is doing quite well with his scaling scheme

I'll try to explain the logic of my statement.
I see it (and hope you can see it too) that scaling in/out is like trading two different strategies.
So you have two strategies on the same instrument and same time frame and same entry (scaling out) or same exits (scaling in). Obviously those two strategies are very correlated in their outcomes.
I explained in another tread that you can be better off by trading even a losing strategy together with a winning one, but its only true if the strategies are negatively correlated. Which is not the case here.
So first you need to test (get results) each strategy alone and see that each is a winning strategy.
The results that you can get are:
1. The scaling strategy is a winning strategy but when you separate it in two different strategies one is winning and one is losing. Will you trade the losing one? I won't.
2. Each strategy is a winning strategy (I seriously doubt it) but one gives you 5K each month and the second 500$. In this case why not trade 2 contracts on first one?
3. One month strategy 1 is better and another month strategy 2 is better. In this case its very good to trade the way you do (scaling). I never saw this happen.

p.s.
If some one wants to read my threads, just do a search. Don't ask me to do it for you. I wrote 4 or 5 of them, so it should not be so difficult.

Reply With Quote
The following 2 users say Thank You to baruchs for this post:
 
(login for full post details)
  #9 (permalink)
NYC
 
 
Posts: 187 since Dec 2010

baruchs, you are simply pointing out the obvious after the fact.
It is like saying after a roulette spin that comes up black, why was anyone so foolish as to bet on red.

Reply With Quote
 
(login for full post details)
  #10 (permalink)
Winter Springs, FL
 
Experience: Intermediate
Platform: Interactive Brokers, Esignal
Broker: Interactive Brokers, Esignal
Trading: futures and liquid $20+ equities
 
Posts: 37 since Sep 2010
Thanks: 21 given, 53 received


FWIW, I scale out but very rarely scale in (trading individual financial instruments, i.e. not correlated pairs, which i would definitely scale in IF i was still using that technique).

My argument for scaling out is simply, I will usually enter in the direction of the trend on the longer time frame (be it 30, 60 or even daily charts). My entry is generally using the 1 and/or 5 minute chart with a target around the last strong support/resistance on those charts, so as long as it does not blow right through those targeted prices, I am looking to yard off some of the position there (usually 50%+, all depends on price action, time of day, etc.) but still hold onto something as a runner. After all, my position is with the prevailing trend.

Something I sometimes do when the trend is undefined is to exit completely on whatever price action i see as a potential stall/reversal signal and put a stop entry (half size) on the other side of that price just in case it breaks through for a continuation of the move.

If I enter as a countertrend fade, I will very rarely scale out.

Just a slightly different opinion

I see the OP is asking about scaling in mostly so as to that, i reckon it depends entirely on your strategy, reasons for entry, timeframes, etc. For my primary strategy now, I enter the trade with a stop in mind that says I misread the market and NOT a price that says, add more if it goes against me. However, I do know of folks that do add in such a way and are successful traders so...

Reply With Quote
The following user says Thank You to Myshkin for this post:
 
(login for full post details)
  #11 (permalink)
NYC
 
 
Posts: 187 since Dec 2010


Myshkin View Post
I see the OP is asking about scaling in mostly so as to that, i reckon it depends entirely on your strategy, reasons for entry, timeframes, etc.

Very true, this is kind of a meaningless discussion without context. If you are playing a trend and entering on a pullback it makes little sense to not scale in because you don't know if the trend has stopped. You can keep the loss smaller but still have room to grab the "meat" of the trade. Faster more choppy trades/fades I think it becomes less sensible although I tend to leave runners on purely for psychological reasons on most trades.

Reply With Quote
 
(login for full post details)
  #12 (permalink)
Israel
 
Experience: Intermediate
Platform: NinjaTrader
Broker: pfg
Trading: eminis
 
Posts: 323 since Jun 2009
Thanks: 6 given, 207 received


Quoting 
baruchs, you are simply pointing out the obvious after the fact.
It is like saying after a roulette spin that comes up black, why was anyone so foolish as to bet on red.

Are you for real?
Do you treat trading like gambling?
Do you know what technical analysis is?
Do you trade any setup without having positive expectancy from backtesting?

Reply With Quote
The following user says Thank You to baruchs for this post:
 
(login for full post details)
  #13 (permalink)
Legendary Market Wizard
Georgia, US
 
Experience: None
Platform: SC
Broker: AMP+CQG
Trading: ES, HSI, Nikkei
 
josh's Avatar
 
Posts: 5,466 since Jan 2011
Thanks: 6,054 given, 14,510 received

Scaling out is perhaps the most mathematically unsound way to manage a trade, in my very humble opinion. When the trade goes against the trader, the trader holds and takes a loss on all contracts. When it goes in his favor, he gets out of the trade.

After taking an original initial risk and entering a trade, scaling in makes a lot more sense mathematically, and, given a confidence that the trade will continue favorably, makes more sense than NOT adding to the position. If you had not taken the original trade, would you seek to enter here? If so, add. If not, don't add. It's that simple. Scaling in with a smaller initial risk does NOT make much sense mathematically as it's the same problem as scaling out, only in reverse (you take a larger position at a more unfavorable price than if you simply entered with a comfortable initial risk).

As an example, given the size of your stop, you have calculated that your risk tolerance allows you to trade 3 contracts on this trade. It would not make sense to start with 1, then add another, then another, for you have increased your average price and simply limited your risk, which is the problem with scaling out, only scaling out is worse because your initial risk is even higher.

All in, all out is the most sensible way, but this presumes that you will know based on back testing how much of a move you can expect. How much risk can you handle? If it's 3%, then put it on. But it would not make sense to NOT add if market conditions say you will benefit by doing so. So AIAO presumes that you WILL know, which you can never know.

I suppose the ideal situation would be to close the entire position when a reversal is anticipated, and then wait for a more favorable position and then enter the full position again. But this is picking tops and bottoms, which is bound to end with trouble in the long run.

Reply With Quote
The following user says Thank You to josh for this post:
 
(login for full post details)
  #14 (permalink)
Mt. Pleasant, SC
 
Experience: Advanced
Platform: Sierra
Broker: AMP
Trading: TF, 6E, ES, & CL
 
Posts: 12 since Feb 2011
Thanks: 18 given, 3 received

"When I'm bearish and I sell a stock, each sale must be at a lower level than the previous sale. When
I am buying, the reverse is true. I must buy on a rising scale. I don’t buy long stocks on a scale
down, I buy on a scale up." Jesse Livermore

Today some call this Pyramiding.

ab

Reply With Quote
The following user says Thank You to abaker for this post:
 
(login for full post details)
  #15 (permalink)
Winter Springs, FL
 
Experience: Intermediate
Platform: Interactive Brokers, Esignal
Broker: Interactive Brokers, Esignal
Trading: futures and liquid $20+ equities
 
Posts: 37 since Sep 2010
Thanks: 21 given, 53 received

These are just opinions and IMHO, it doesn’t make sense to throw out a blanket statement like” it is mathematically unsound to scale out” when you are not considering all the different types of trading.
I used to trade equity OPGs and would sometimes get a bunch of fills at the open (well, 7 or 8 is a bunch for me), dumping the ones that were moving against me but taking off half of the share size of the ones in my favor in the first few minutes, leaving on the rest to see how each one was behaving in relation to the market as a whole, etc. Anyway, that is a strategy where it makes no sense not to scale out. Another example that necessitates scaling in and out is if you are throwing around size in a relatively illiquid market (be it 3000 shares in a stock that trades 200k per day or 40k shares in a stock that trades 3 million…talk about slippage and orders sprinting away from your megablock

Beyond that, it depends upon your trading style like how tight your stops are in relation to your targets and what % of your entries get stopped out right away and what % go into a good profit before coming back to BE or stop you out(the latter would be better to scale out, the former probably not).

For my psychology, scaling out works because I have an OK knack for entries, I do not have a knack for knowing exactly where the price will turn (if I did, I would be retired), my winning % is higher than it would be otherwise (net profit, truthfully, about the same) and my trading style is conditioned to stay active. Besides, one issue with all in-all out is the probability that you may miss those rare 4 Sigma day moves, thinking it is too low to drop more, etc. For me, if i am already sitting on a good profit, I am more inclined to see what is happening with clear n' objective equanimity, "market is dropping off a cliff, let us hold a small amount until we see yet another final capitulation" (as those days have several, each one bigger than the last, or so it seems).

As many have said on here, it all depends upon what works for your distinct personality but scaling in and out can work for some strategies

Reply With Quote
The following user says Thank You to Myshkin for this post:
 
(login for full post details)
  #16 (permalink)
Legendary Market Wizard
Georgia, US
 
Experience: None
Platform: SC
Broker: AMP+CQG
Trading: ES, HSI, Nikkei
 
josh's Avatar
 
Posts: 5,466 since Jan 2011
Thanks: 6,054 given, 14,510 received


Myshkin View Post
Besides, one issue with all in-all out is the probability that you may miss those rare 4 Sigma day moves, thinking it is too low to drop more, etc.

Myshkin, my posts are solely my opinion as well, as the first sentence of my prior post said, so these are definitely just my thoughts, and in no way intended to be anything other than that.

If scaling out for someone's trading actually shows a higher profit than an AIAO, then one way to increase the profit would be to take the profits sooner (to be determined by the data) by exiting the entire position. In other words, the targets of the trades are too high, as they are so rarely reached that it makes little sense to hold the bulk of the position waiting for that target. At any rate, this is something about which people will always disagree. I think you had it right when you said that perhaps more important than the mathematics, which almost always go against scaling out, is the psychology of the trader. Who doesn't like to bank profits and reduce risk? Regardless of the logic behind scaling out, if the trader trades well with it, then he should do it, period.

As for the portion of your post I quoted above, I do not like profit targets and almost always let the market take out my trailing stop. If I see what looks like exhaustion, I will manually close the trade, and am working on being able to re-enter with confidence.

Reply With Quote
The following user says Thank You to josh for this post:
 
(login for full post details)
  #17 (permalink)
Winter Springs, FL
 
Experience: Intermediate
Platform: Interactive Brokers, Esignal
Broker: Interactive Brokers, Esignal
Trading: futures and liquid $20+ equities
 
Posts: 37 since Sep 2010
Thanks: 21 given, 53 received

Hey josh, it's hard to get the attitude of someone from written posts and yes, I definitely appreciated that your opinion was just that with your extended spelled out version of IMVHO (i'm too lazy

Definitely, IF one can dump their entire position when PA dictates and get back in full size when PA says it is time to get back in, either with price improvement or when the traded instrument has cleared the confluence zone, then that is the way to go, for sure. I'm still going with the notion that the profitability of scaling out totally depends upon how good a trader is at entries and exits and % of being stopped out which is largely to do with, as you said, reasonable profit targets and of course, high probability entries. If you are profitable on half your trades with the ability to hold onto a portion of your position for those rare (bit not too) 10 X profits, then it will usually work out mathematically better than an AIAO strat with too small a target. You know, it all depends on the instrument and right now, say CL, a 25 tick stop is reasonable (barely) and you know it can move 250 ticks in less than an hour, so... As you know, just different takes and to me, both valid.

Have a great week trading bro.

Reply With Quote
The following user says Thank You to Myshkin for this post:
 
(login for full post details)
  #18 (permalink)
Israel
 
Experience: Intermediate
Platform: NinjaTrader
Broker: pfg
Trading: eminis
 
Posts: 323 since Jun 2009
Thanks: 6 given, 207 received

I must disagree with all of you. All I'm saying is to treat the scaling as two different strategies. If you do this then you'll be able to collect results of each strategy and decide. As I wrote earlier you will have 3 possible outcomes and in one of them you will benefit from scaling. I don't believe that you actually will, but its a remote possibility. In any way then we are talking about two strategies and because they are unknown strategies, then not me and not anyone can tell if both are good or just one or none of them.
If you treat scaling as one strategy then you intentionally want to trade blind folded, and its entirely up to you.

Reply With Quote
The following user says Thank You to baruchs for this post:
 
(login for full post details)
  #19 (permalink)
Rockland county , New York
 
Experience: Intermediate
Platform: NT 7
Trading: CL, 6E, SI, ZC
 
whatnext's Avatar
 
Posts: 235 since Mar 2011
Thanks: 338 given, 80 received


baruchs View Post
2. Each strategy is a winning strategy (I seriously doubt it) but one gives you 5K each month and the second 500$. In this case why not trade 2 contracts on first one?

Because, not having complete certainty on the outcome, you adhere to a fixed fractal percentage. Shorting a correction when you have contracts going the other way can hedge against some the losses and potentially give indications of when to re-enter an additional fixed fractal percentage towards the greater trend.

Depends on the strength of the trend, the ability to get good fills/exits and the degree to which you are moving the market (not much in most people's case). Human error unavoidable but not necessarily to the extent that it becomes a losing strategy in the long run.

Getting all your eggs in at the right time will always be better but comes with such a risk.

Reply With Quote
The following user says Thank You to whatnext for this post:
 
(login for full post details)
  #20 (permalink)
Israel
 
Experience: Intermediate
Platform: NinjaTrader
Broker: pfg
Trading: eminis
 
Posts: 323 since Jun 2009
Thanks: 6 given, 207 received


Quoting 
Because, not having complete certainty on the outcome, you adhere to a fixed fractal percentage.

You still don't get it. I'll try to explain for the last time.
If you treat a scaling strategy as one strategy, you will have two outcomes in the long run:
1. Its a winning strategy -> trade it
2. Its a losing strategy -> ???
If you split it in two strategies, you will have 4 outcomes:
1. Each strategy is a winning strategy and some periods strat1 is better and others strat2 is better -> trade both. Equivalent to the first outcome of combined strategy.
2. Both strategies are losing -> Equivalent to the second outcome of combined strategy.
3. One is winning and one is losing -> maybe, just maybe you will conceder dumping the losing.
4. Both are winning, but one is much better then the other -> do whatever you want. I would dump the inferior strategy.
If you can contradict this analysis, I'll be very pleased, otherwise I don't want to argue. I don't care if you have a friend who trades it profitable, or in other explanations (fractals??).
I have a friend who won 1 million in a lottery, and my father is Benoit Mandelbrot. So?

Reply With Quote
The following user says Thank You to baruchs for this post:
 
(login for full post details)
  #21 (permalink)
Rockland county , New York
 
Experience: Intermediate
Platform: NT 7
Trading: CL, 6E, SI, ZC
 
whatnext's Avatar
 
Posts: 235 since Mar 2011
Thanks: 338 given, 80 received

Not sure how you see what was written as an argument.

It was in response to your classification of them being separate strategies.

What led me to favor the method was past inefficiencies in position building upon a strong trend without risking too much at a time.

If you, or anyone else, has an alternative to doing so - I'm all ears.

ETA:

baruchs View Post
4. Both are winning, but one is much better then the other -> do whatever you want. I would dump the inferior strategy.
If you can contradict this analysis, I'll be very pleased, otherwise I don't want to argue.

In hopes of pleasing you a contradiction could be that the inferior strategy would have to be replaced by something and if you are just focusing on one instrument...

Reply With Quote
The following user says Thank You to whatnext for this post:
 
(login for full post details)
  #22 (permalink)
Winter Springs, FL
 
Experience: Intermediate
Platform: Interactive Brokers, Esignal
Broker: Interactive Brokers, Esignal
Trading: futures and liquid $20+ equities
 
Posts: 37 since Sep 2010
Thanks: 21 given, 53 received


baruchs View Post
I must disagree with all of you. All I'm saying is to treat the scaling as two different strategies. If you do this then you'll be able to collect results of each strategy and decide. As I wrote earlier you will have 3 possible outcomes and in one of them you will benefit from scaling. I don't believe that you actually will, but its a remote possibility. In any way then we are talking about two strategies and because they are unknown strategies, then not me and not anyone can tell if both are good or just one or none of them.
If you treat scaling as one strategy then you intentionally want to trade blind folded, and its entirely up to you.

Truly a good argument, especially because it IS backed up mathematically (my backtesting likewise confirms that scaling out, in ALMOST all strats is suboptimal).

However, in real world trading, the approximate target we may have in mind (S/R or trend lines, etc.) may change as the actual trade unfolds, be it news related, an unexpected turn in the euro, whatever. Yes, this is up to the trader's discretion and is where the "art of trading" is needed but say you were shooting for AIAO 5 points and it has hit 3 points and a sideways chop, do you take off all of it there or just a half of your position and see if it pushes through or you get stopped out BE?

Another example, say you are in a few CL contracts short from 100.4 yesterday and it has just spiked down through support but showed a reversal bar at 9:01. Yes, you are perhaps still bearish on CL but slightly less because it has come in significantly and you think the current trend is hard to read due to the overnight action. So, do you get out of the entire position, or just half and see what it (and the Euro) does from there?

Logically, scaling out makes sense to me because the markets are fluid/uncertain and scaling out is likewise much more mentally "fluid" than the etched in stone ALL out.

Failing all these arguments, scaling out can be a nice psychological crutch and as the game is at least 60% psychological, IMHO, it is a good option

Reply With Quote
The following user says Thank You to Myshkin for this post:
 
(login for full post details)
  #23 (permalink)
denver, colorado
 
Experience: Intermediate
Platform: NT
Trading: ZS
 
Surly's Avatar
 
Posts: 704 since Mar 2011
Thanks: 628 given, 1,254 received


Quoting 
1. Each strategy is a winning strategy and some periods strat1 is better and others strat2 is better -> trade both. Equivalent to the first outcome of combined strategy.

This statement is the best argument I see for using a scaling out strategy. If you take a trade with two positions and you close the two positions with different rules then you have effectively place two trades. If you use consistent (but different) rules for your two exits then you are effectively trading two strategies (as baruchs pointed out) - and one is likely going to have a higher expectancy than the other.

The idea that certain conditions may favor one exit criteria over another COULD lead to such a strategy (two different exit criteria on 2 unit trades) smoothing results over time. However, (and I can't back this up with math) I would guess that it is unlikely the two exit strategies could be configured in such a way as that they both lead to equal expectancies and so one will always be better than the other.

Personally I consider it a good trade-off to gain some smoothing of P/L (thus making it psychologically easier to stick to the plan) in exchange for absolute return (at the expense of less smooth P/L). However, I hope to evolve to being able to trade an AIAO strategy with its concurrent choppy P/L and higher absolute returns.

Visit my futures io Trade Journal Reply With Quote
The following user says Thank You to Surly for this post:
 
(login for full post details)
  #24 (permalink)
Israel
 
Experience: Intermediate
Platform: NinjaTrader
Broker: pfg
Trading: eminis
 
Posts: 323 since Jun 2009
Thanks: 6 given, 207 received


Quoting 
Personally I consider it a good trade-off to gain some smoothing of P/L

I absolutely agree that a smoothing of P/L is the most important aspect in trading. I even showed that if the correlation btw. two strategies outcome is negative you can be better off even if one of the strategies is a losing strategy. In scaling this is NOT the case. The "two" strategies are very very very high correlated, and thats why you will NOT get a P/L smoothing!!!
For example lets take a scaling in strategy. If we look for correlation of the outcomes from the scaling strategy it is 100% correlated to the initial strategy!! If you entered a trade in the scaling part and now you have 2 contracts so if you win you win on both and if you lose you lose on both. If you look for correlation from the first part then you will have some trades that are winners or losers (depending if your scaling in is when you up front or in lose) without a trade on the scaling part.
I want to say something about my trading if some people do not know it yet.
I believe only in automatic trading. All my statements are mathematical FACTS and I see if some addition or a change in strategy like in:

Quoting 
Another example, say you are in a few CL contracts short from 100.4 yesterday and it has just spiked down through support but showed a reversal bar at 9:01. Yes, you are perhaps still bearish on CL but slightly less because it has come in significantly and you think the current trend is hard to read due to the overnight action. So, do you get out of the entire position, or just half and see what it (and the Euro) does from there?

had an edge in backtesting.
As I see it discretionary trader is a gambler (its OK for some people, but not for me). That also mean that a discretionary trader may take a trade and on the next day (after he forgets about it) he replays the market action and he takes a different trade and again some days later. Each time he will have very strong arguments why to do it like he did and he even won't be confused to see that in the same situation he behaved differently. As you call it, he had different "gut feeling" each time.

To conclude:
You will get much better results if you trade several setups and/or on several instruments and/or on different TF, but scaling is the worst possible solution.
If you still want to do it at least take a note if each strategy (original and the scaling) is profitable.

Reply With Quote
The following 2 users say Thank You to baruchs for this post:
 
(login for full post details)
  #25 (permalink)
Switzerland
 
 
Posts: 112 since Aug 2009

Hi

I may really did not understand every thing, but what when only scaling in and always get out with the whole amount of contracts, when stop is hit or when taking profit ?

Reply With Quote
 
(login for full post details)
  #26 (permalink)
denver, colorado
 
Experience: Intermediate
Platform: NT
Trading: ZS
 
Surly's Avatar
 
Posts: 704 since Mar 2011
Thanks: 628 given, 1,254 received

Baruchs - if I understand your statement correctly you are saying that the size of a profit target has no effect on the expectancy of a given trading strategy. I doubt this is what you're saying so I think I don't understand your statement.

If you initiate two positions in the same place with the same stop and have two different profit targets won't each of these trading strategies (assuming they are applied consistently) have a different expectancy?

As a oversimplified example, let's say you the two profit targets are 10 and 20 - in ranging markets the 10 pt target gets hit 2.5 times as often as the 20 pt target. In trending markets it gets hit exactly as often as the 20 pt target (by definition). If a market ranges for 2 weeks straight, the strategy with the 10 pt target will have a higher expectancy than the 20 pt target strategy for that 2 weeks. Thus when markets go from ranging to trending and back, the two profit targets will smooth returns.

Is there something wrong with my thinking here? honest question - I'm still learning...

thanks,
surly

Visit my futures io Trade Journal Reply With Quote
The following user says Thank You to Surly for this post:
 
(login for full post details)
  #27 (permalink)
Israel
 
Experience: Intermediate
Platform: NinjaTrader
Broker: pfg
Trading: eminis
 
Posts: 323 since Jun 2009
Thanks: 6 given, 207 received


Quoting 
If you initiate two positions in the same place with the same stop and have two different profit targets won't each of these trading strategies (assuming they are applied consistently) have a different expectancy?

In my explanation I refereed to scaling in. This was the example someone posted. You talk about scaling out. Its the same sh.., but the arithmetic is a little different. I don't intend to give here private lessons, so don't ask me what if I scale in and then scale out and sometimes move my stop to BE and sometimes move my PT to BE and trail my stop and and...
All I'm saying is: Treat scaling as two separate strategies. First check that each strategy is PROFITABLE. Then look if one is not inferior to the other.
My point is that no matter how you do it those two strategies will be much much more correlated in their outcomes than any other two strategies(not scaling type)!!!!!
If this is true then the smoothing of P/L will be much much much smaller than with any other two strategies.

Reply With Quote
The following 2 users say Thank You to baruchs for this post:
 
(login for full post details)
  #28 (permalink)
Winter Springs, FL
 
Experience: Intermediate
Platform: Interactive Brokers, Esignal
Broker: Interactive Brokers, Esignal
Trading: futures and liquid $20+ equities
 
Posts: 37 since Sep 2010
Thanks: 21 given, 53 received


baruchs View Post
As I see it discretionary trader is a gambler (its OK for some people, but not for me). That also mean that a discretionary trader may take a trade and on the next day (after he forgets about it) he replays the market action and he takes a different trade and again some days later. Each time he will have very strong arguments why to do it like he did and he even won't be confused to see that in the same situation he behaved differently. As you call it, he had different "gut feeling" each time.

Absolutely true, trading IS gambling in that you are putting money on an UNCERTAIN future. Whether automated or discretionary, it is a game of probability, pure and simple.

EVERY day of trading is unique but the detected similarities that we have experienced 50 times are what we are relying on to make us some coin. If a trader fails to see these similarities, as you said, "he forgets", then cannot possibly be a profitable trader because how can you possibly see your edge or the probabilities of a successful trade if you can't recall whatever your setups are or what they or the market dynamics look like in real time?

Also, I am not saying "discretionary" is to have no rules at all but to include some flexibility in your rules because, as i wrote in a prior post, the markets are fluid/malleable. I know of no traders that are consistently bringing in money that trade purely on "gut instinct" and everyone I know that does well has a method/system/strategy (or several), one is totally automated, a couple are more gray box and a few more are analyzing everything themselves and using their own discretion to a certain extent at different times.

Say your system has you in a CL contract from 97.05 and the rule(automated) to sell your CL contract when it hits 98.48 but when it has climbed up to 98.43, news comes out that Gadaffi has been killed and it starts to tank. The trader then uses their "discretion" to decide if they want to sell the position a little early or wait until they are stopped out at BE (not have to wait to long). I am not saying that you cannot make money with AIAO automation because clearly, you can. I am saying that people can make just as much or more if they really know market dynamics, have mastered their emotions and are great at getting good production, i.e. scaling out, getting back in with size or more size when called for...

Oh yeah, scaling out does not necessarily mean that you are out of that portion of the position for good as you can always add it back, especially if you are good at reading PA..."OK, it should come back in here so let's dump a couple of contracts. OK, it has come in 20 ticks, let's put them back on again with that 20 ticks price improvement. Surely, it doesn't take much of an analysis to see that today's bottom to top CL move of just over 200 ticks had within it an easy 900 ticks of potential production, short here, cover there, reverse entire position, etc.

Anyway, just saying there are at least 34 ways to skin a cat and scaling out can be a valuable scalpel if you know how to use it (unfortunately, my fingers were removed in a weird garbage disposal accident as a child so...well...)

Reply With Quote
The following user says Thank You to Myshkin for this post:
 
(login for full post details)
  #29 (permalink)
Rockland county , New York
 
Experience: Intermediate
Platform: NT 7
Trading: CL, 6E, SI, ZC
 
whatnext's Avatar
 
Posts: 235 since Mar 2011
Thanks: 338 given, 80 received


Delta_Panther View Post
but what when only scaling in and always get out with the whole amount of contracts, when stop is hit or when taking profit ?

With individual stocks I just put the money in there and would sell if it went down about 7% or if my opinion changed. Adding to the position was usually a result of ending positions in other stocks and not having a better idea of something that would be likely to perform better % wise.

With futures being so leveraged a question is then (or please anyone tweak if you have a better idea):

1. Would it be better to put the total sum planned in the future, when you think you found a bottom, then try to get out if you lost 7% or so of the money allocated to that investment.

Or

2. Build on that investment by risking something like 1.5% at a time.

With the risk of losing more than the intended 7% and uncertainty of not losing it again the next time around I can't justify not just risking 1.5% at a time. Others input would be very much appreciated.

FWIW, I screwed myself out of a lot of money recently by selling 1/2 the futures contracts prematurely, instead of waiting to be stopped out. I don't even want to call it scaling out - it was panic selling where an irrational fear of loss is justified at the time by not wanting to "get greedy". The remaining contracts were stopped out on the day it hit a 30 year high.




Myshkin View Post
Absolutely true, trading IS gambling in that you are putting money on an UNCERTAIN future. Whether automated or discretionary, it is a game of probability, pure and simple.

Making investments when the outcome is uncertain, but you believe the odds of profitability are in your favor, is speculation.

Putting money towards something where you know the odds aren't in your favor is gambling.

If a person thinks the odds are in their favor but are wrong and lose money they are an unsuccessful investor.

Reply With Quote
The following user says Thank You to whatnext for this post:
 
(login for full post details)
  #30 (permalink)
Winter Springs, FL
 
Experience: Intermediate
Platform: Interactive Brokers, Esignal
Broker: Interactive Brokers, Esignal
Trading: futures and liquid $20+ equities
 
Posts: 37 since Sep 2010
Thanks: 21 given, 53 received


whatnext View Post
Making investments when the outcome is uncertain, but you believe the odds of profitability are in your favor, is speculation.

Putting money towards something where you know the odds aren't in your favor is gambling.

If a person thinks the odds are in their favor but are wrong and lose money they are an unsuccessful investor.

Top poker players and blackjack card counters are gambling and they are increasing the size of their bets according to when the odds/probability ARE in their favor much like when a high PROBABILITY setup calls for you to throw in your digital chips and roll the dice (hopefully loaded in your favor;-)

Call it gambling or speculation, it's just semantics, bro

Reply With Quote
The following user says Thank You to Myshkin for this post:
 
(login for full post details)
  #31 (permalink)
Israel
 
Experience: Intermediate
Platform: NinjaTrader
Broker: pfg
Trading: eminis
 
Posts: 323 since Jun 2009
Thanks: 6 given, 207 received


Quoting 
Absolutely true, trading IS gambling in that you are putting money on an UNCERTAIN future. Whether automated or discretionary, it is a game of probability, pure and simple.

Here I lost you. On one hand you say that its a game of probabilities, but then you say that each day is different and you trade different because of it.
As I see it or you are very good statistician and can calculate probabilities in more sophisticated manor than I can, or you call a strategy (setup) your entry criteria, and you draw your probabilities from your discretionary back performance.
For me a strategy/setup is a combination of entry point, stop loss and PT. Of course I try to test that my setup doesn't break if I change my stop or PT by a few ticks, but the same goes to my entries.
Unfortunately with my limited statistical knowledge I can get probabilities, on which I can relay, only from a complete setup.

Reply With Quote
The following 2 users say Thank You to baruchs for this post:
 
(login for full post details)
  #32 (permalink)
Rockland county , New York
 
Experience: Intermediate
Platform: NT 7
Trading: CL, 6E, SI, ZC
 
whatnext's Avatar
 
Posts: 235 since Mar 2011
Thanks: 338 given, 80 received


Myshkin View Post
Top poker players and blackjack card counters are gambling and they are increasing the size of their bets according to when the odds/probability ARE in their favor much like when a high PROBABILITY setup calls for you to throw in your digital chips and roll the dice (hopefully loaded in your favor;-)

Poker shows cherry pick exciting hands and don't give you an idea of what it's like to play at that table.

What you are describing sounds like a "pump it or dump it" method of betting based on current hand strength.

In no limit, these people would be easy to shake out of a hand when weak and easy to limit losses against with when strong, because they are so easy to read.

Each flop, turn and river isn't a role of the dice because the percentages don't reset to a fixed ratio as the hand progresses.

Reply With Quote
The following user says Thank You to whatnext for this post:
 
(login for full post details)
  #33 (permalink)
Legendary Market Wizard
Georgia, US
 
Experience: None
Platform: SC
Broker: AMP+CQG
Trading: ES, HSI, Nikkei
 
josh's Avatar
 
Posts: 5,466 since Jan 2011
Thanks: 6,054 given, 14,510 received


Myshkin View Post
OK, it has come in 20 ticks, let's put them back on again with that 20 ticks price improvement. Surely, it doesn't take much of an analysis to see that today's bottom to top CL move of just over 200 ticks had within it an easy 900 ticks of potential production, short here, cover there, reverse entire position, etc.

Sure, it doesn't take much of an analysis, in hindsight, but to trade this way, in real time, is nearly impossible and I suspect only a few of the best can really do this on a consistent basis. That's based on nothing other than my own experience that trading is hard enough just to get into a position, and be able to hold that position for a profit, much less get out with a profit, reverse bias on the spot, take that profit, reverse again, and so on. It sounds so easy and looks so easy that you would have taken profit here, re-entered here, and on and on. As I said I know some people are successful at this, but what you are essentially describing is not only being right in a direction, but predicting turns in the market. No one can do this, not consistently anyway. Anyone who says they called a bottom or top over and over, market after market, is lying, plain and simple. It's too hard, and to think you can do it on anything other than sheer luck is to delude yourself, IMHO. Trading probabilities is one thing, to be an oracle in trading is to be a liar.

Reply With Quote
The following 2 users say Thank You to josh for this post:
 
(login for full post details)
  #34 (permalink)
Winter Springs, FL
 
Experience: Intermediate
Platform: Interactive Brokers, Esignal
Broker: Interactive Brokers, Esignal
Trading: futures and liquid $20+ equities
 
Posts: 37 since Sep 2010
Thanks: 21 given, 53 received


baruchs View Post
Here I lost you. On one hand you say that its a game of probabilities, but then you say that each day is different and you trade different because of it.
As I see it or you are very good statistician and can calculate probabilities in more sophisticated manor than I can, or you call a strategy (setup) your entry criteria, and you draw your probabilities from your discretionary back performance.
For me a strategy/setup is a combination of entry point, stop loss and PT. Of course I try to test that my setup doesn't break if I change my stop or PT by a few ticks, but the same goes to my entries.
Unfortunately with my limited statistical knowledge I can get probabilities, on which I can relay, only from a complete setup.

First off, I am not throwing down a challenge and I am quite certain that you are far better at calculating probabilities on the fly but try to keep things in context, brotherman, as my "probability" comment was regarding you speaking of trading as "gambling" if "discretionary" trading (a point on which i pointed out that it is usually not just based on a blind hunch but experience).

And yes, each day is different, are you saying it is not? If a system trading CL does not also consider that 6E is RIGHT NOW, not yesterday's similar price action, hitting its uber strong resistance and you are long CL, you then, from experience of seeing such before, consider the PROBABILITY of what is going to happen, maybe slightly less bullish and see what happens. If back in March, there is news that Kadaffi is killed or today's oil report showed 4k build across the board, I am not using time calculating probabilities, i am immediately short or out. This is based on experience and from that experience, we determine our probabilities of what will happen, looking then at the chart to see where next support line is, etc. Again, probability that it may hold that line but we look and see what it will do.

I am not saying your system doesn't work or that there is anything wrong with AIAO or entering purely on backtested probabilities (obviously:-) I am just trying to put forth the argument that flexibility, with scaling out (and in) and getting lots of production using the trader's own discretion is also a possible profitable angle. As for fairly successful discretionary traders, look up Jesse Livermore or more recently, Paul Tudor Jones.

Reply With Quote
The following user says Thank You to Myshkin for this post:
 
(login for full post details)
  #35 (permalink)
Winter Springs, FL
 
Experience: Intermediate
Platform: Interactive Brokers, Esignal
Broker: Interactive Brokers, Esignal
Trading: futures and liquid $20+ equities
 
Posts: 37 since Sep 2010
Thanks: 21 given, 53 received


josh View Post
Sure, it doesn't take much of an analysis, in hindsight, but to trade this way, in real time, is nearly impossible and I suspect only a few of the best can really do this on a consistent basis. That's based on nothing other than my own experience that trading is hard enough just to get into a position, and be able to hold that position for a profit, much less get out with a profit, reverse bias on the spot, take that profit, reverse again, and so on. It sounds so easy and looks so easy that you would have taken profit here, re-entered here, and on and on. As I said I know some people are successful at this, but what you are essentially describing is not only being right in a direction, but predicting turns in the market. No one can do this, not consistently anyway. Anyone who says they called a bottom or top over and over, market after market, is lying, plain and simple. It's too hard, and to think you can do it on anything other than sheer luck is to delude yourself, IMHO. Trading probabilities is one thing, to be an oracle in trading is to be a liar.



LOL Trading is definitely difficult and sure, there are no oracles of trading, picking every bottom and top (unless you are fading my trades on some days;-)
I was merely trying to make the point that there is not only one correct way to trade, i.e. buy once and sell once.
It is also possible to buy at strong support, sell some at minor resistance, buy a bit more if it comes off that price, sell when it hits (and holds) minor resistance again or when it breaks through to next magnet resistance. The thread is about scaling in so I am putting forth a method which involves scaling in (after scaling out). For some people, it works. If something else works for you, that's good too

Reply With Quote
The following 2 users say Thank You to Myshkin for this post:
 
(login for full post details)
  #36 (permalink)
Winter Springs, FL
 
Experience: Intermediate
Platform: Interactive Brokers, Esignal
Broker: Interactive Brokers, Esignal
Trading: futures and liquid $20+ equities
 
Posts: 37 since Sep 2010
Thanks: 21 given, 53 received


whatnext View Post
Poker shows cherry pick exciting hands and don't give you an idea of what it's like to play at that table.

What you are describing sounds like a "pump it or dump it" method of betting based on current hand strength.

In no limit, these people would be easy to shake out of a hand when weak and easy to limit losses against with when strong, because they are so easy to read.

Each flop, turn and river isn't a role of the dice because the percentages don't reset to a fixed ratio as the hand progresses.

I was just throwing out an analogy dude, perhaps a weak one, that trading is gambling just like poker/blackjack is gambling and the "loaded" dice are your strong edge in the trade. Anyway, high probability trading setup=pair of J in the hole and a 2d, 6h and Js comes out on the flop. I really don't know poker all that well but you get the idea.

Reply With Quote
The following user says Thank You to Myshkin for this post:
 
(login for full post details)
  #37 (permalink)
phx AZ US
 
Experience: Intermediate
Platform: sierra chart
Broker: Infinity
Trading: es
 
tradersam's Avatar
 
Posts: 211 since Feb 2010
Thanks: 481 given, 267 received


Myshkin View Post
LOL Trading is definitely difficult and sure, there are no oracles of trading, picking every bottom and top (unless you are fading my trades on some days;-)
I was merely trying to make the point that there is not only one correct way to trade, i.e. buy once and sell once.
It is also possible to buy at strong support, sell some at minor resistance, buy a bit more if it comes off that price, sell when it hits (and holds) minor resistance again or when it breaks through to next magnet resistance. The thread is about scaling in so I am putting forth a method which involves scaling in (after scaling out). For some people, it works. If something else works for you, that's good too

One good book is "Optimizing your trading edge" by Bo yoder. It speaks a lot about payback cycle( ie. you redge has a +ve expectancy). Basic idea is that either the market is is payback mode or it is not. If it is not , then you take conservative approach. If it is then you go aggressive. These cycles repeat periodically for evey edge. How a trader recognizes the state of the current cycle is a little vague though ( more of a feel thing).

Just a thought. But maybe this concept can be used to decide if scaling in is advisible or not.

Sam

Visit my futures io Trade Journal Reply With Quote
The following 2 users say Thank You to tradersam for this post:


futures io Trading Community Psychology and Money Management > Add to a trade


Last Updated on May 19, 2011


Upcoming Webinars and Events
 

NinjaTrader Indicator Challenge!

Ongoing
 

Battlestations! Show us your trading desk - $1,500 in prizes!

March
 

Importance of Finding Your Own Way w/Adam Grimes

Elite only
 

Journal Challenge w/Jigsaw

April
     



Copyright © 2021 by futures io, s.a., Av Ricardo J. Alfaro, Century Tower, Panama, +507 833-9432, info@futures.io
All information is for educational use only and is not investment advice.
There is a substantial risk of loss in trading commodity futures, stocks, options and foreign exchange products. Past performance is not indicative of future results.
no new posts