steve2222 

And what is the Accordion Trades method? Not cryptic for 'According to XXXX' I assume

that was 10Y ago and he misspelled it and I still remember
google 'short-oil-125-55-and-up.126763/page-3' if you interest

xplorer 

About scaling in when price goes against you, in my opinion, the debate about doing it or not is much like many other debates in trading: it is all a matter of experience.

I think it's more a matter of understanding... if that makes any sense. Understanding the market you trade and understanding yourself. @ Grantx

phantomtrader 

Yes. Lake Tahoe area. And I have two of them - siblings. They go nuts in the snow!

Love it I had a husky for a spell in my life (not sure what breed yours are but same idea suburban Indiana is no place for Siberian Huskies lol... and she would have done well where we are now, except for all the woods, burrs, ticks, fleas, etc haha... unfortunately she passed some time ago. Zoso was an awesome dog; intelligent, independent and a big lover. I miss her.

bobwest 

That 10+ year experience thing is a very important point. When someone's good at something, it seems "intuitive" to them -- they "just know" what to do. We don't always realize that anything is "intuitive," once you've thoroughly learned it and done it long enough and well enough. Until then, not so much -- and there's struggle and unproductive effort. All that time in the trenches was definitely part of how Ed could do something easily that seems difficult to the point of being incomprehensible to most of us. (I include myself .)

Totally agree Bob. Personally, I find myself leveraging on my instincts more than ever these days. Also gets back to knowing what works as a foundation for one as a trader, and building it up from there.

SMCJB 

“Does Averaging in Work?” by Ernie Chan. Quantitative Trading: Does Averaging-In Work? "Why you should add to winners and never add to losers" by me! Why you should add to winners and never add to losers Why you should add to winners and never add to losers I recently got an email from Kevin Davey of KJ Trading, aka kevinkdog, regarding his latest blog post entitled Peel Off Trading (. Kevin is a highly respected member of nexusfi.com (formerly BMT) …

LOL I read through all of that, and it's waaaaay over my simple head, but I love you math guys and will continue doing what it is that I do despite all your calculating I did want to say thanks @ SMCJB, we've never interacted much but I follow your posts and appreciate that you have been contributing here for so long.

TWDsje 

Now on the other side I've met a lot of traders through discord, and almost every big disaster was caused by averaging into losers on a trend day. Misuse of such strategies blows up more accounts than anything else, no doubt about it!

TOTALLY agree, and you bring to light a very important point.. to do it, one must know their market, know when they are right and when they are wrong. My biggest loss ever was because of exactly what you mentioned... a strong trending day took me out. Great stuff @ TWDsje. 6E moves in a way we can take advantage of the ability to scale in. Some instruments do not... and I apologise, I've only traded the Euro in my short career so any comments I have made here should be taken with that in mind.

---


I'm really appreciating this discussion. According to the poll thus far, 155 people have voted and we only have a handful of people posting here. We certainly would like to hear from those of you that have not yet voiced your opinion... whether it sucks or not LOL

the 10+ years experience and knowing your market inside out is certainly a good thing. but it does not save you from disaster. averaging down is a famous reason for professional traders to lose their job.

I've seen it many times. you go long, market goes against you. no problem just a great opportunity to buy cheaper. market still goes against you. well in my 10+ years of experience the market will bounce back (for whatever reason). but it doesn't happen. now you're almost at a point of no return. should I take that huge loss or should I go all in? with your ego and pride, of course you go all in. needless to say what happened next.

it doesn't matter how experienced you are and how well you know your market. you just have to know when it's enough. you need some kind of a hard stop. and it doesn't matter if the trade is still good in your books.

silver99 

Ed is the master of this strategy. He knows the area of interest, the points of exit and executes it perfectly. Win or lose, he sticks with his plan.

I also wanted to say... good to see you here man. Thought all the old school crowd had disappeared...

bobwest 

I think there are two separate issues here, and two actions that seem the same (because they are both adding to a position), but actually are very different: 2. Deliberately scaling in as a realistic strategy to improve your position in a good trade, whether the market is going against you in the short term or not. There are people who can actually do this, and part of what makes it possible for them is being able to identify when the trade is still good and when it is not. It also takes some capital and some nerve. Bob.

THis ^. If you intentionally enter in to 1/2 your position to get in the market, then plan on entering in if it goes slightly against you (usually a S/R level) it gives you a bit of planned (key word) wiggle room. How many people get the perfect entry? barely anyone consistantly.

The point is your are acquiring an average price in pre-planned points, rather than emotionally getting back at the market or trying to prove yourselkf right. You still have a predetermined exit if the scaling doesnt work.

In essence you are entering a position taking into account normal noise, and planning for it.

Rrrracer 

I think it's more a matter of understanding... if that makes any sense. Understanding the market you trade and understanding yourself.

Silvester17 

the 10+ years experience and knowing your market inside out is certainly a good thing. but it does not save you from disaster. averaging down is a famous reason for professional traders to lose their job. I've seen it many times. you go long, market goes against you. no problem just a great opportunity to buy cheaper. market still goes against you. well in my 10+ years of experience the market will bounce back (for whatever reason). but it doesn't happen. now you're almost at a point of no return. should I take that huge loss or should I go all in? with your ego and pride, of course you go all in. needless to say what happened next. it doesn't matter how experienced you are and how well you know your market. you just have to know when it's enough. you need some kind of a hard stop. and it doesn't matter if the trade is still good in your books.

I just wanted to clarify something:

When I mentioned experience I did not mean to imply that, as long as one is experienced, it is okay to double down. That would suggest that all seasoned traders can and should double down. That was not my intent.


I really wanted to convey, from a more abstract standpoint, how crucial experience is in trading.


So, we can all agree that @Inletcap, for example, is a very experienced trader, who happens to include scaling-in as part of his strategy. But that's a product of his specific trading style, which is probably derived by his particular trading development roadmap.

Now, do all experienced traders go through the same roadmap? Of course not. Some become excellent scalpers (MLM and Newt come to mind), others become fine swingers or investors: scaling-in need not be included as technique for any of them.

In other words, there are some traits that, to me, will be common to all experienced traders - e.g. ability to deal with losses/resilience, understanding your market and yourself ( @Rrrracer ) - but there are other aspects that are highly dependent on trading style and choice, and scaling-in would fall into this latter category.

TL;DR:
All traders that intend to double-down better be very experienced, but not all experienced traders need to double-down to trade successfully.

bobwest 

More on @Inletcap and scaling in (and out.)

Great discussion and many good points made. Thoroughly enjoy reading and thinking about the different views presented which all have in common the same ultimate goal in mind. Many thanks to all who have contributed to this thread.

I still visit with Ed and Michael regularly, both are doing very well in life and trading.

Ed and Michael both are committed to their strategy, they do not hesitate to enter, they do not overthink it. Ed's strategy has not changed from what he wrote in TSJ, still very profitable. Michael's (and my) basic scalping strategy has not changed, but we are going for larger targets on runners. I admire and respect both of these guys and have learned much from both of them.

Beneficial lessons that I have learned from my time in TSJ and FIO:

1.) If it fits your strategy, take the trade, don't hesitate.
2.) Never be afraid to learn something new, or at a minimum to give it a look-see/try.
3.) Life and trading is a journey, enjoy the ride.

Newt

Very interesting points from both sides. Great discussion!
You either do or you dont. My personal preference is to scale in with the trade (and I do) but a huge disadvantage to that method is that my average entry gets worse each time. I'm patient and will wait for particular setups but to then have the quality of initial position eroded away is something I'm still trying to figure out because it hasn't really worked all that well for me yet.

Think about it. Trading off limit orders leans more to the aggressive style of trading because at some lower timeframe you are counter trend trading right? And lets say this strategy is working out for you and you decide to press the winners by scaling in. Well that seems counter intuitive because you may as well forego the initial risk (aggressive counter trend trade) and simply go in on full size with confirmation, and this seemingly simple decision is not a subtle one because it completely changes your trading style. So I still haven't managed to wrap my head around this one.

In theory, the idea of scaling into a position that has turned negative makes a lot of sense under certain circumstances:

1. You have identified prevailing market conditions and even though market has moved against your trade, your scaling methodology is inline with the higher timeframe condition. If you are fighting against it then thats just stupid.
2. You generally are not very good at picking correct trade location but you have a good record picking market direction. You know, perhaps you are less technically inclined but are more able to understand the underlying theme. Something like that

.

Intraday scaling is also quite difficult depending on the instrument. I imagine CL or NQ would be easier to press than something slower like 6e. If you had an average of 100 ticks a day to work with as opposed to 30 ticks...well that would determine your scaling methodology.

Silvester17 

I've seen it many times. you go long, market goes against you. no problem just a great opportunity to buy cheaper. market still goes against you. well in my 10+ years of experience the market will bounce back (for whatever reason). but it doesn't happen. now you're almost at a point of no return. should I take that huge loss or should I go all in? with your ego and pride, of course you go all in. needless to say what happened next.

xplorer 

TL;DR: All traders that intend to double-down better be very experienced, but not all experienced traders need to double-down to trade successfully.

I think that in this discussion we should not lose sight of the fact that, if you just automatically double down every time you have a loss, you're crazy, and soon out of business.

Nor of the fact that some traders can scale in on a loss and do it well, but not automatically and not foolishly. There are several years of posting on the spoos thread where such traders as tigertrader and @Big Mike consistently added to positions when price went against them, and also stopped and bailed out when it went far enough that they clearly were wrong on the trade, according to criteria that they were clear about when the trade started. Although this was a few years ago and the thread is now dead, it was an education at the time. (If anyone has not looked at it, it starts here:

Spoo-nalysis ES e-mini futures S&P 500 Lame Ducks Both Fed Chairman Bernanke’s remarks yesterday and President Obama’s speech last night about his jobs plan; combined, failed to reassure the market that a solution to the country’s economic woes was at hand, and the …

. Be warned it covers many years and is mostly just trades being posted, so it's not light reading. )

That said, I am never going to do it, having learned the lesson early and expensively.

But there is more than one way to successfully trade. Also, more than one way to lose everything.

I think we have seen examples of every conceivable strategy done poorly, and a few examples of them being done well (some of them anyway. )

Bob.

bobwest 

I think that in this discussion we should not lose sight of the fact that, if you just automatically double down every time you have a loss, you're crazy, and soon out of business. Nor of the fact that some traders can scale in on a loss and do it well, but not automatically and not foolishly. There are several years of posting on the spoos thread where such traders as tigertrader and @Big Mike consistently added to positions when price went against them, and also stopped and bailed out when it went far enough that they clearly were wrong on the trade, according to criteria that they were clear about when the trade started. Although this was a few years ago and the thread is now dead, it was an education at the time. (If anyone has not looked at it, it starts here: Spoo-nalysis ES e-mini futures S&P 500 Lame Ducks Both Fed Chairman Bernanke’s remarks yesterday and President Obama’s speech last night about his jobs plan; combined, failed to reassure the market that a solution to the country’s economic woes was at hand, and the … . Be warned it covers many years and is mostly just trades being posted, so it's not light reading. ) That said, I am never going to do it, having learned the lesson early and expensively. But there is more than one way to successfully trade. Also, more than one way to lose everything. I think we have seen examples of every conceivable strategy done poorly, and a few examples of them being done well (some of them anyway. ) Bob.

I agree. Even if you're an experienced trader, you can't know when the market is just going to blast you out of your position. And as TWDsje said, if it rapidly turns into a trend day, how much are you willing to lose before you believe what your eyes are telling you? Simple motto: Trust no one. Trust nothing. In, out, get it done, shut it down.