unfortunately I'm not such a great trader that when I enter a trade it doesn't move a few ticks against me. but I'm only risking a certain amount. at this point no one knows if the stop is good or not. after the trade I'll know. but I'll certainly not add more contracts to find out.
just imagine, you think you have a good stop and add more contracts with lower risk and then you get stopped out. and after 1 or 2 ticks the markets reverses and goes your way. even if you didn't lose much with you added contracts, it's still kind of a unpleasant feeling that will stick with you.
even if you have some great statistics, the market don't care about them. a few ticks above or below certain points will not change the structure of the market, but it will change your account.
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I don't know anyone who can enter consistently without the market moving against them at least a few ticks.
You seem to be focusing on the negative scenario. Imagine this, based on your statistics you have an average MAE of 8 ticks, you add 2 more at 8 on a trade with a small stop. The trade goes on and is a +30 winner like you anticipated in the beginning. You risked 8 more ticks and got 60+. Now, this may not happen 60% of the time, but if it happens enough, then it will more than pay for itself. Statistics will tell me how to optimize this. But, in my mind, IF your stop was set properly, then it seems silly not to add more when trading near that level with a very small stop. IF your stop is no longer good in your mind, then exit the trade, don't add any, done.
In my opinion, you may only get an unpleasant feeling when you are not trading your well designed and statistically tracked and optimized trading plan properly.
Have a great day,
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This is an awesome subject to discuss. I think most of us leave money on the table due to improper scaling or not scaling at all.
BUT, there are two issues that must be addressed: 1) This thread assumes you have enough winning trades to accurately determine MAE and 2) You have traded the system long enough so that the MAE you do have is on the same system and not on multiple systems/indicator combination's.
Otherwise, the discussion about to scale or not to scale is wasted.
My vote is this: Scale in if the original premise of the trade is still valid, and take profit at your original targets. If the premise is no longer valid, exit the trade completely.
That being said, I am still working on the confidence to do this. It is coming but not quite there yet!
Simplicity is the ultimate sophistication, Leonardo da Vinci
Most people chose unhappiness over uncertainty, Tim Ferris
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That's quite a thought Gary!
But isn't an adverse excursion the earliest sign of a trade that could fail?
However, if I were to adapt this style, I'd enter a position with half the size and the remaining at the average adverse excursion of winning trades.This could prove to be fruitful in the long run, provided one could also scale in the remaining half (or more) at an average favorable excursion for trades that have little or no adverse excursion.
We can't all nail tops and bottoms to the tick. How many winning trades do you have with a 0 tick MAE? But, if my statistics (based on 100s of trades) tell me that on average on my winning trades I will have an average of an 8 tick MAE, then now I have something to work with. If I am good enough to be able to place stops just ticks beyond that to start with, like 12, and then do the math (win vs loss %, avg win vs loss, etc, etc), now I have a working strategy for increasing net $ while keeping the risk pretty minimal.
For me personally, I really think it is this simple:
Are you placing your stops correctly? Yes, then, if you can, you need to add near your stop (adding only a small amount of more risk), or you should already be out of the trade if you feel your original stop is no longer valid.
It does look like I got some people thinking on this which was the whole point.
Have a good one,
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