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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?

  #31 (permalink)
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I disagree with entry 1 not occurring anymore, because you cannot have a perfect entry - and if you try, you will end up missing more signals that worked than didn't, in my opinion.

Long story short, there is no black and white answer only many shades of grey. Everyone should analyze their trades and come up with their own plan of how to improve their trading. I believe that is what Gary is doing.

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  #32 (permalink)
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'E' - Ratio

Here's my experience with this subject.

Scaling into and out of trades requires real skills. Never add to a loser is absolutely correct. For me a losing trade is ONE TICK PAST my STOP.

Up to my stop it is still a valid trade to enter. I can now watch for additional signals on a smaller time frame to add more even though I'm taking heat. I prefer this to taking the full position at the initial signal. I know most entries take some heat. This is common practise amongst professional traders. Adding past the stop is averaging a loser and a certain way to blow up an account!

I do this on the back of knowing my 'e' edge ratio. Divide MFE by MAE and look for greater than 2.00 over hundreds of trades. A super good day can be 20.0 and a garbage day 0.96. A good week for me is + 3.50. Knowing what causes your e ratio to suffer keeps you disciplined.

Shivaya

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  #33 (permalink)
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Shivaya View Post
Never add to a loser is absolutely correct. For me a losing trade is ONE TICK PAST my STOP.

Up to my stop it is still a valid trade to enter.

Well said.

Mike

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  #34 (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

Why not use a second strategy based only on the occasion that a position is going against you after entry.
e.g. your Standard Entry plus a draw back of five ticks...
If that strategy works out even though with a lower frequency, you have your answer, or maybe, even a better strategy, which might be worth more risk per trade, given the smaller stop and the hopefully higher expectancy.

Locust

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  #35 (permalink)
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Great analysis

Appreciate your thoughtful and well-grounded response.


Shivaya View Post
Here's my experience with this subject.

Scaling into and out of trades requires real skills. Never add to a loser is absolutely correct. For me a losing trade is ONE TICK PAST my STOP.

Up to my stop it is still a valid trade to enter. I can now watch for additional signals on a smaller time frame to add more even though I'm taking heat. I prefer this to taking the full position at the initial signal. I know most entries take some heat. This is common practise amongst professional traders. Adding past the stop is averaging a loser and a certain way to blow up an account!

I do this on the back of knowing my 'e' edge ratio. Divide MFE by MAE and look for greater than 2.00 over hundreds of trades. A super good day can be 20.0 and a garbage day 0.96. A good week for me is + 3.50. Knowing what causes your e ratio to suffer keeps you disciplined.

Shivaya


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  #36 (permalink)
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Locust View Post
Why not use a second strategy based only on the occasion that a position is going against you after entry.
e.g. your Standard Entry plus a draw back of five ticks...
If that strategy works out even though with a lower frequency, you have your answer, or maybe, even a better strategy, which might be worth more risk per trade, given the smaller stop and the hopefully higher expectancy.

Locust

Hey Locust,

Exactly what I am doing today. 2 ATMs: one for the usual, and one for adding near average MAE.

And, I re-read your post, and see what you are saying about the possibility of having a better strategy than the original.

Thanks again,
Gary


Last edited by Gary; September 29th, 2010 at 03:20 PM.
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  #37 (permalink)
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Hi
How did you get that 8 ticks average number? Average isn't same as peak of distribution.
Do you realize that every lose will be with two contracts but not all wins. When price get down you don't have to be filled.


What was the point to get in the market when you finish first trade with loss of 1 tick ?
It looked to me that you just want move your entry lover to be sooner BE ?


Last edited by Lejcus; March 30th, 2011 at 05:32 AM.
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  #38 (permalink)
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max-td View Post
hey Gary,

that is absolutely OK, i do that also sometimes

its valid for me if :

- my defined entry-trigger is triggered yet
- my setup is still valid
- my initial SL is not hit yet
- my targets are not hit yet

that means the whole setup is in action + valid - so i am allowed to enter aditional positions at any place i like to.

i am allowed to enter some ticks better than the trigger was > if price comes back -
this offers a smaller SL like you mentioned - because the initial point of the SL stays fix - not the SL value but the point the SL sits on!

and i am allowed to enter in a running trade wich is in profit some ticks yet, as long as target 1 isnt hit yet
- (i can do this when i missed an entry iE )


for shure you can also try to speculate always for a better price then your initial trigger is.
you dont enter at the trigger but you try to enter some ticks better with a limitorder after the setup is triggered.
this gives you a risk of a run-away-priceaction where you dont get a fill.

that part must be added to thoughts + stats then -> is it worth to try to enter ALWAYs better than the trigger -- how much win-trades you gonna loose because market runs aways without a fill.
this is a part for the stats again.

over all - a valid + powerfull idea if you have a well defined setup.

in my eyes

I do that too, and couldn't agree more.

"The only thing to do when a man is wrong is to be right by ceasing to be wrong." - Edwin Lefevre -
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  #39 (permalink)
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THoughts on MAE

Hi Gary
This is a very thoughful process, i see where you are coming from and i would consider the same if the original position was not stopped out and no material change to the original setup. then by using exact same stop a better entry to scale in definitely worth a shoot, as long as my aggregate risk is taken care of.

I have another question here in regards to MAE, hoping to have a discussion.
Would you consider, in your case, to have another strategy base on similar entry setup, but with just 9ticks stoploss. and by reducing initial stop, with same risk appetitie, you can now do approx 1.5 times bigger. which essentially i think this help overall to cut losers small and keep/upsize quality winners?

i am not a math genius but do you think this may end up with lesser trades, smaller average losers, mayb not higher average profit but absolute profit will be higher in this case?

I am looking at my MAE and MFE, been thinking how else i can improve my trades, hoping you can enlighten?

cheers
DarrenC

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  #40 (permalink)
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Big Mike View Post
I disagree with entry 1 not occurring anymore, because you cannot have a perfect entry - and if you try, you will end up missing more signals that worked than didn't, in my opinion.


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Interesting post.

My entire strategy is predicated on a perfect entry. And although you are right and I miss fills regularly, the trades that I win are indeed winners while the impact of my losses are kept infinitesimal. This strategy tends to only make sense in an environment with extremely low cost, or nonexistent, trading fees (in my case, equities) which allows one to make multiple attempts to enter a position without incurring any commissions.

Just throwing that out there

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