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Scaling-in/Adding near your average MAE; why not?
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Scaling-in/Adding near your average MAE; why not?

  #11 (permalink)
Market Wizard
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Gary View Post
Silvester,

Help me understand this. Why are you still in the position when it is going against you, but has not yet hit your stop IF you believe the stop is no longer any good?

Because, IF you believe the stop is good, then why wouldn't you add and keep the original stop on your new entry?

I also agree adding to a winning position can be equally rewarding and I do this as well, but often will exit on the pullback and then re-enter with the new buy signal. This suits my trading style and personality well and allows me to reduce risk, take some profit, and then ride the new signal.

Gary

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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  #12 (permalink)
CL Assassin
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Silvester17 View Post
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.

Silvester,

Thanks again for your reply.

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,
Gary

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  #13 (permalink)
Market Wizard
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Gary View Post
Silvester,

Thanks again for your reply.

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,
Gary

gary,

you're absolutely right. I focus on the negative scenario. negative scenario for me = preserving capital.

don't get me wrong. if you trade that way and make money, that's great. keep on going.

you have a great day and good luck trading.

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  #14 (permalink)
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My thoughts about scaling in or scaling out.

If I believe the market is going up, I go long.

If the market pulls back a couple of ticks below my entry, I now have an opportunity.

Entering a second contract here is a much better entry with greater profit potential than the first entry.

The second entry is the better one. Why would I abandon it because the first entry "sucked"??


For you guys who only scale out of trades. why take the first target if you think the markets going higher???

If you reply that scaling out is smart money management, then you must accept that the same is true when it comes to scaling in.

Smart Money Management!!!! = Profits!!!!

RJay

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  #15 (permalink)
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RJay View Post
My thoughts about scaling in or scaling out.

If I believe the market is going up, I go long.

If the market pulls back a couple of ticks below my entry, I now have an opportunity.

Entering a second contract here is a much better entry with greater profit potential than the first entry.

The second entry is the better one. Why would I abandon it because the first entry "sucked"??


For you guys who only scale out of trades. why take the first target if you think the markets going higher???

If you reply that scaling out is smart money management, then you must accept that the same is true when it comes to scaling in.

Smart Money Management!!!! = Profits!!!!

RJay

you forgot one little detail. do you mean scaling in on a winning or a losing trade? that makes a huge difference imo. the same for scaling out. would you scale out on a loosing trade?

where I come from there's a unwritten law: in day trading never, ever add to a loosing position. no matter what.


Last edited by Silvester17; September 22nd, 2010 at 11:03 AM.
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  #16 (permalink)
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Gary View Post
Hey all,

Riddle me this....

Let's say my statistics tell me that on my winning trades I have an average MAE of 8 ticks. For this example, let's assume that I am using a 12 tick initial stop.

Why would I not want to add to my position if/when price is trading against my initial entry around the 8-12 tick area with a smaller stop?

Example:

I enter using a buy stop market order on CL @ 75.11, my initial stop is $74.99. Shortly after entry, price is trading around $75.03. Why not add more here with a 4 tick stop? Statistics tell me that this is as far against me as it will go, on average. I add to my position with relatively little more risk, but the upside is potentially much larger.

If you think your initial stop is no good any longer, then why are you still in the trade? Why wait for it to hit your stop? Your stop should be placed in such a way that you know you are wrong if your stop is hit.

On the other hand, if you know your stop is good based on your experience and statistics, why not add more with a small stop (still honoring your initial stop) thus allowing a slight bit more risk, but maximizing your upside much more?

2ND part to my riddle:

Best way to handle this logistically with Ninja?

I currently do the following:

Enter trade with buy stop market order with "ATM Strategy 1", change to "ATM Strategy 2" (add with 4 tick stop) and place a limit order 8 ticks from initial entry, and then manage the exits as I normally would; possibly even look to pull off some of the trade near my original entry. Exits will and should be based on statistics and price action at the time the order is placed.

Ideally, price trades against me enough to fill my additional order, and then moves on like I expected it to move in the first place.

Something to think about......

Thoughts / comments / suggestions?

Thanks,
Gary

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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  #17 (permalink)
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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.

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  #18 (permalink)
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deadlyvenom View Post
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.

Hey Deadlyvenom,

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,
Gary

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  #19 (permalink)
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No takers on part 2 of my riddle or am I already doing it as efficiently as possible with Ninja?

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  #20 (permalink)
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part 2 :

i would NOT try to change ATMs during trading - that can mess up heaviely during the action !

try to

- select-active-ATM-strategy-on-order-submision - option in the properties

>> this chooses exactly the same targets + stop-places like the first position - no matter where you enter

OR

-- use a second diff. ATM in the charttrader / second DOM to enter fast your "ATM Strategy 2" (add with 4 tick stop)

thats what i recomand.

max-td
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