Welcome to NexusFi: the best trading community on the planet, with over 150,000 members Sign Up Now for Free
Genuine reviews from real traders, not fake reviews from stealth vendors
Quality education from leading professional traders
We are a friendly, helpful, and positive community
We do not tolerate rude behavior, trolling, or vendors advertising in posts
We are here to help, just let us know what you need
You'll need to register in order to view the content of the threads and start contributing to our community. It's free for basic access, or support us by becoming an Elite Member -- see if you qualify for a discount below.
-- Big Mike, Site Administrator
(If you already have an account, login at the top of the page)
Thanks @lovetotrade, that's very good stuff, and very true. There have been many times I have been in a good trade, one where I know it's going my way, and yet fail to take full advantage of it with the original position, much less close out and add as would be most beneficial to the account.
Willing to cut a little slack though, as we are all still learning. TT said it best, wish I had the quote at hand, but it is our obligation as a trader to make the most of these situations to the best of your ability, because they are the ones that will ultimately turn you into a trading animal.
We spend a lot of time meddling around, some profits here, some losses there... trading can be like that, but man, when those opportunities arise, you have to absolutely squeeze them for everything you can and collect those outsized gains.
Part of that is recognizing when you are in those situations; the other parts are trading them in a fearless manner, and knowing how to do so. Only comes with experience.
Thanks for the excellent share buddy. I never made it through that book but gonna have another run at it now, seems like a good time.
Thanks for sharing that @lovetotrade. Makes a lot of sense and really got me thinking that there is room for improvement with my trade management. I've pressed winners before with success but never really developed the method any further. Don't think I've come across this book but I'll Google up on it now.
@lovetotrade... this is exactly where I see myself at. I can get into good trades AND (more importantly) I know that feeling when I am reading things right... I need to squeeze ever effin penny out of those times that I can. I love the way he puts it, "Do you act aggressively when you know you are right". Interesting word choice and exactly what I needed to hear... Thanks and best of luck to you...
Craig
This is very interesting material, and I always like to read Steenbarger.
It's also an age-old controversy: if you scale in to a trade as it becomes profitable, you move your average basis up (or down) in the direction of the trade. If you are adding too late in a move, you can be right about everything, but be unable to withstand much of a reversal without actually having a loss because so much of your position was put on late. You have to be not only right, but also relatively early. So it's better if this is a fairly long-term move instead of a shorter one. But do you know it's going to be big ahead of time? And do you know you're still early and not near the end?
I know that the remedy to this is simply to always be right, and never get in any part of the trade too late, but this may not be so simple to actually do....
Also, for what it's worth, I just viewed @michaelleemoore's interesting video from last year, which I missed at the time because I was not spending the time on FIO I should have. (Mistake. ) He's a successful, and fairly extreme, scalper, holding for at most 10 or 20 ticks, and often just 5. There's no opportunity to add when you're doing that, and no need to -- well, assuming you're profitable at it, which he is.
And then there are the traders (rare ones, I believe) who can scale in while the trade is losing and still come out ahead, which is yet another strategy.
So I think that this discussion is valuable, but that one size does not necessarily fit all.
Is a person looking for -- and successfully finding and holding onto -- really big moves that take time to mature and cover a lot of ground, and can the trader find scaling in opportunities early enough that the math can work -- or at least not clustered too near the end? OK, then this strategy would probably work.
Is a person looking for something with a shorter lifespan, not necessarily a small scalp, but not a move that is expected to go on for hours or days? Maybe it would work then too, but the shorter the timespan, the trickier it would get.
I think that some of this is also not technical or even strategic, but temperamental. How does the trader want to trade? Also, how can the trader trade? I would be happy just to be consistent for a while in some way or another, and then to worry about how to improve my game....
Thanks for bringing the subject up. My only point would be that there are some choices for a trader to make about how, and whether, to attempt to implement it.
In strong down trends such as yesterday afternoon, I have scale in short when the market rising.
Conventional wisdom might say don't add to losing trade or don't sell options when volatility is rising and a particular equity is falling. Low risk/high reward IMO
I found that when the time is right, that those are by far the most profitable trades to take. Fear is a much stronger emotion than joy and that plays out in the market. Embrace the volatility especially for fundamentally strong stock such as Facebook or even a strong market that is having a pullback.
Volatility is good for the market and trading.
Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
Yes exactly. TT comes to mind a lot when I get to thinking and writing about maximizing profit potential. He was so good at it. When I get to thinking about my own experience, it is such a grind of profitable/losing days, but never the occasional day that makes my month or quarter. Those days are so essential to asymmetric account growth, and having a real shot at turning this gig from a hobby to a career. Most days are about taking as much as you can from the market, while giving as little back as possible, but the most important days for me are about being willing to risk a substantial profit on the day to absolutely kill it. That has been a struggle for me, but learning to know the right conditions for that kind of day, and focusing on the process has made it easier to switch mindsets.
It's one of those books that if you come back to every six months, while trading in the meantime, will have a new perspective and fresh look at quality information you didn't quite pick up on previously. It has new applications for me every time I read it. That is priceless.
Rule number one in the markets is to never lose money. Well since that isn't realistic, I say if you're going to lose some money anyway then lose small, but when you win, give it all you've got and win big!
Going for the kill is an extremely accurate analogy once you get a taste of that feeling when you know you're right... Cheers, glad you found value in it. Best of luck!
Rule number one in the markets is to never lose money. Well since that isn't realistic, I say if you're going to lose some money anyway then lose small, but when you win, give it all you've got and win big!
Thanks Bob, as usual an enlightening and well thought out post.
So I decided to quote that specific section in the book for two specific reasons: First and most importantly is Brett's @steenbab stature and reputation in the trading world. When you are working with essentially some of the world's most successful traders, and have been around trading success/failure for as long as he has, then when he lists attributes of those top traders, I tune in BIG TIME. Second is that it truly vibes with me, and the way I am built to trade. As you mentioned, I too believe that trading success comes down to how you decide to trade(and it must fit you), and that this(scaling) is not for everyone.
Here is a big BUT though, and where some of my opinions probably differ a bit from yours. I believe that part of finding success in this game is forcing yourself to learn to trade a. counter to the way the majority of the public trades, and b. counter intuitively to how we are naturally geared, no matter which way you trade. I think scalpers will always be the market anomaly, but it is proven time and time again that the easiest way to profitability is to trade with the trend. Though it is each person's own individual journey on how they tackle trend trading, I do feel there are certain rules that must be followed to achieve a high level of success as Brett laid out, and I am in agreement that most of those lie in trade management(which is very broad mind you).
I identify with Big Mike and Inletcap the most on this forum in the way that they trade(from what I have seen). I do believe there is a time to scale in when the market is moving against you(when building a position strategically), and when it is moving in your favor(maybe you need to get in, and pullbacks are absent). I look at the market like an ever flowing current, sometimes it's like a river, other times like white water rapids, and if my experience has taught me anything it is that it makes no sense to be so rigid in something that requires so much flexibility. This applies to stops as much as entries sometimes!
You say, "Is a person looking for -- and successfully finding and holding onto -- really big moves that take time to mature and cover a lot of ground, and can the trader find scaling in opportunities early enough that the math can work -- or at least not clustered too near the end? OK, then this strategy would probably work." But this is exactly the point, and why scaling is so important, along with having a gameplan, AND knowing your market well. They all go hand in hand, and compliment each other well, but only scaling has the ability to maximize efficiency on the day. I also think this is a very limited point of view, which I guess makes sense since I believe scaling only enhances any one specific entry, and I get the feeling you not so much
As always your opinions are highly valued here, and I appreciate the input. For sure this will be a debate that goes on to the end of time!
Rule number one in the markets is to never lose money. Well since that isn't realistic, I say if you're going to lose some money anyway then lose small, but when you win, give it all you've got and win big!
Right on man, thanks for bringing this topic up. "Asymmetric account growth" was the phrase I was looking for, and a very important topic. I've been very happy with what I've been able to accomplish thus far, but the hunt for one of those "kill zone" days is always in the back of my mind; glad you brought it to the forefront because it IS something we need to be thinking about in terms of being successful with longevity in this business.
And I will be checking out DTC again very soon, think it could definitely help at this stage in my development. Thanks man!
I posted about asymmetric returns in another thread and the recent market volatility has made for some very profitable trend days. Two strong trends today
I honestly think that I have been fortunate and the returns will level off (or losses) when IV returns to normal. Still haven't look at my p/l summary in the scalping /es account.
I really think that is a key to being successful on a short time frame, turning off the p/l and trading the chart. At least starting out
Volatility is good for the market and trading.
Preservation of capital is the most important concept for those who want to stay in the trading game for the long haul. - Van Tharp
) He's a successful, and fairly extreme, 
