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Adding to winning position.


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Adding to winning position.

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  #1 (permalink)
 jitasb 
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Is there a thread or info on the methods/strategies for adding to a winning position. I am looking to incorporate it into my trading, but it "seems" a bit counter-intuitive as you are in effect making your "average" price worse.

Thanks

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 David_R 
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jitasb View Post
Is there a thread or info on the methods/strategies for adding to a winning position. I am looking to incorporate it into my trading, but it "seems" a bit counter-intuitive as you are in effect making your "average" price worse.

Thanks

I personally have always found this to be difficult. It may be less so for something that trades a longer time frame, but for day trading I prefer to enter my position and scale out. One suggestion on adding would be on a strong trend day to add on pullbacks.

D

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 OKshunalTrader 
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I would like to learn how to better manage my trades. This would include both when to HOLD FOLD, or Cash in.

The problem with trading is one needs to be right twice!
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 josh 
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@tigertrader is an expert on this, you will want his input on the subject...

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 choke35 
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jitasb View Post
Is there a thread or info on the methods/strategies for adding to a winning position. I am looking to incorporate it into my trading, but it "seems" a bit counter-intuitive as you are in effect making your "average" price worse.

Thanks

Perhaps you are interested in the English version of a paper by Thomas Wacker then:
"Play Poker for Your Profits"

Page 8 - e_tr07_2012

He shows some methods and examples for getting better R:R ratios with scaling into positions.

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 rgakalo 
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choke35 View Post
Perhaps you are interested in the English version of a paper by Thomas Wacker then:
"Play Poker for Your Profits"

Page 8 - e_tr07_2012

He shows some methods and examples for getting better R:R ratios with scaling into positions.

The link isn't working, any ideas where to find this article?

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 tihfa 
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jitasb View Post
Is there a thread or info on the methods/strategies for adding to a winning position. I am looking to incorporate it into my trading, but it "seems" a bit counter-intuitive as you are in effect making your "average" price worse.

Thanks

The idea is to have some kind of dynamic ( "trailing" ) stop, basically only risking a loss on newly added position or think of it as adding on to the core position that you can trade around as the price keeps moving in anticipated trend direction. You profit is (N-1)* R_avg where you ended up having N entries and R_avg is perhaps some kind of average R for all individual R exposure whenever you added size....

Search for posts by tigertrader as he was using that type of position management or just search in general using advanced search with different keywords....

wish you good success with back testing!

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  #9 (permalink)
wBobby
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I remember reading in "Way of the Turtle", by Curtis Faith, that one of the key factors in the Turtles' profitability was adding to winning positions.

I've also read a few articles that suggest that scaling in does indeed increase profits, and scaling out is mathematically proven to reduce returns.
It does seem intuitive to me that adding to positions that have moved in your favour is common sense, since your analysis has essentially been proved correct. And that scaling out is the opposite of that.

I'm pretty sure I read a similar logic about Jesse Livermore's technique.

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 WoodyFox 
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Scaling (As in averaging up) can help you...because nobody can get an entry perfect every time and it allows you to manage the capital you are willing to risk on each position. As well as target higher profits by lessening additional risk when done correctly.

One key to do this is not risking to much on a position with each additional entry. It also becomes more difficult in shorter term trading when you target smaller moves that do not align with the volatility and size of the market you are trading.

I do have strategies that will average down, but only after a least one average up has occurred. It must also be a better entry than the original. That being said. I only use them when capital allows and because of this...it only happens within micro size products at this time. I also hold for long periods of time (Days, Weeks, sometimes Months).

So yes...Scaling does work when done correctly. But if your that trader that can pick entries perfectly, go ahead and load up on your initial entry?? But seriously, it should be all about managing risk to your capital and tools like this can help.

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