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Hedge a losing position? 62 replies

Take a loss in a losing position or wait for it to turn around? 16 replies

Money Management - Losing Position 5 replies

How to rescue a losing position?

Quoting Kanzler
If anybody could get out of paying their dues to the market from an already losing trade with any consistency, they would be a very rich person indeed. I would think that over. It's the holy grail except flipped - instead of looking for the ultimate way to win, you're looking for the ultimate way to not lose.
This person as I mentioned earlier did suffer some losses, so there were trades beyond rescue. But I'm just amaze how he/she incur such low loss %.
Forex is my business
Quoting Kanzler
Agreed, and it makes no sense to hold both positions at the same time. Most brokers won't allow it anyhow.
I can see why some are hedging.. Most are doing it the wrong way and for the wrong reasons in the same time, but I understand..
Quoting incomeideas
This person as I mentioned earlier did suffer some losses. But I'm just amaze how he/she incur such low loss %.
I think more importantly it would be interesting to see what kind of drawdown this person was experiencing. High win rate but huge drawdown is the hallmark of the martingale loser.
Conventional wisdom leads to conventional results.
Quoting attila
I can see why some are hedging.. Most are doing it the wrong way and for the wrong reasons in the same time, but I understand..
Here's where most get it wrong... if you decide you hedge and try to salvage losing positions, then hedging is THE CENTERPIECE of your trading plan, and all the other rules derive from there.. This is whyI said most get it wrong.. They want the best of both worlds. They want to go in high leverage, and if it goes bad they want their money back somehow, and they start hedging randomly.. That's exactly how you blow accounts. These are two completely opposite approaches to trading.. I did them both and my conclusion is working with a tight SL is more beneficial for my mental health because the hedging mentality will kill you when the market starts trending fast... No need to explain why.
Quoting Forexgogo
The question is, how skillful you are to calculate the most optimum SL.

Hope it helps.
Take care of that and you will not have to worry about rescuing a losing position.
Look for a strategy that will increase the probability of keeping your drawdowns low.
  • Post# 46
  • Quote
  • Dec 15, 2012 2:34pm | Edited at 2:48pm – added TAF thread example
The only way I know to rescue a failing trade is to plan for this eventuality ahead of time using fti's (TAF thread) rescue skew. What you're doing here is re-averaging the price of the starting trade with more pieces than you started with. fti trades without a stop loss...and he'll be the first to say that not all trades should be rescued.

Take the amount of money you want to risk and divide it into either 20 or 32 pieces. Each piece is called a Scout. You're essentially scaling in with price and scaling out with the TP's. The rescue skew is based on a Fib progression...1,1,2,3,5,8...or 1,2,3,5,8,13. When you need to rescue a Scout that is in trouble you wait until you get a retrace back into your original direction and rescue the Scout with 3 more pieces. This is also called snowballing and can take your head off is you don't use it correctly. You can rescue with 3,5,8, or 13 pieces. The rescue isn't designed to make you a profit. It's designed to make as much money over a short number of retrace pips as you have lost on your original Scout position. You do this to Square your book so that when you do close the loss trade you have an offsetting profit trade and the net effect is zero.

Perhaps the best way to see what I'm talking about is to see an example. Here is Leighsww rescuing an EU trade on 5 min TF;
http://www.forexfactory.com/showthre...09#post1830509

I suggest that you read the Technical Analysis Fallacy thread for a more in-depth view on this technique.

Best,

Eric.
" Be always employed in something useful." - Benjamin Franklin
Quoting cougar73
The only way I know to rescue a failing trade is to plan for this eventuality ahead of time using fti's (TAF thread) rescue skew. What you're doing here is re-averaging the price of the starting trade with more pieces than you started with. fti trades without a stop loss...and he'll be the first to say that not all trades should be rescued.

Take the amount of money you want to risk and divide it into either 20 or 32 pieces. Each piece is called a Scout. You're essentially scaling in with price and scaling out with the TP's. The rescue skew is...
Sounds like averaging down, with a twist. Not sure how that helps much as you lose profit when you are right by not adding your full position at the start of winners. While it does soften losers at least up to maximum position size, it just seems like a cheap numbers trick which isn't worth the pain associated with it.
Conventional wisdom leads to conventional results.
You're right. It can be a bit of a pain...especially if you get it wrong. Best to demo the idea before you try it live.

Quoting Kanzler
Sounds like averaging down, with a twist. Not sure how that helps much as you lose profit when you are right by not adding your full position at the start of winners. While it does soften losers at least up to maximum position size, it just seems like a cheap numbers trick which isn't worth the pain associated with it.
Best,

Eric.
" Be always employed in something useful." - Benjamin Franklin
Quoting Kanzler
Sounds like averaging down, with a twist. Not sure how that helps much as you lose profit when you are right by not adding your full position at the start of winners. While it does soften losers at least up to maximum position size, it just seems like a cheap numbers trick which isn't worth the pain associated with it.
Most mistakenly adopt the rescue part of the TAF (Technical Analysis Fallacy) thread as the golden goose and focus on that part alone, averaging in and out are the core concept, but the "adding" in profit aspect is more critical to overall success than the rescue side, which most seem to gravitate towards as a way to avoid loss. Rescue takes place when you feel you are still in the main trend direction, but have mistimed your initial entry, averaging down to bring your overall average position to within retraceable distances and exiting..... an actual position in the red where the chart tells you your wrong should be exited. either quickly at the initial point where your technically against the move or on the first retrace in your favor, as often times broken levels are revisited before continuation... however betting the farm on that retrace will eventually lead you into blowout.

The OP's original question is almost impossible to answer without further explanation of their trading style. Too many variables for one pat answer or even if it's worth the extra risk.
Quoting auxesis
Most mistakenly adopt the rescue part of the TAF (Technical Analysis Fallacy) thread as the golden goose and focus on that part alone, averaging in and out are the core concept, but the "adding" in profit aspect is more critical to overall success than the rescue side, which most seem to gravitate towards as a way to avoid loss. Rescue takes place when you feel you are still in the main trend direction, but have mistimed your initial entry, averaging down to bring your overall average position to within retraceable distances and exiting..... an...
Thanks for the clarification, that makes more sense.
Conventional wisdom leads to conventional results.
Quoting incomeideas
The loss management/damage control portion of the plan has yet to establish, thus the purpose for this thread.
which begs the question of why are you placing trades if the most important part of a trading plan has yet to be established?
Quoting JR97
which begs the question of why are you placing trades if the most important part of a trading plan has yet to be established?
Quoting JR97
which begs the question of why are you placing trades if the most important part of a trading plan has yet to be established?


EXACTLY.

Just my opinion... my 2 pips worth...

I have been taught that as forex traders we have 2 accounts. Our trading account and our psychological account.
BOTH NEED TO BE PROTECTED... especially for the newer traders...

If a trader does not know in advance "at what point am I wrong" then why the heck would he/she enter the trade at all.

If your building a house and notice that one wall is crooked... do you keep building it?
NO... (hopefully). The work will come to a STOP... the crooked wall is removed and forgotten about... and then rebuilt better...

and I see a 200 pip stop loss mentioned.... 200 pips??? Seriously?

recommendation:
1) that the 200 pip stop be tightened AS A PART OF AN EXIT STRATEGY
2) A potential re-entry be pre-planned at a better price AS A PART OF AN EXIT STRATEGY
3) That #1 and #2 above be done BEFORE ENTERING INTO A TRADE

SCENARIO:
If you and I both go long XYZ/ZYX at 1.0000... your stop loss is 200 pips, mine is 50.
The trade goes against us both 175 pips... I am out, minus 50. You are still in, minus 175
I re-enter and the trade goes all the way back to the original entry at 1.000
I am up 125 pips (175 minus the 50 pip loss) and my psychological account is ok
You are break even... and perhaps a little worn out and beat up psychologically riding out that drawdown

Just Sayin...
Keep your walls straight!!!

I have re-typed in red words in the order they appear:
EXIT STRATEGY EXIT STRATEGY BEFORE ENTERING INTO A TRADE

Good Luck!!!
Deanoracer,

The issuewith bailing at 50 with a 200 sl is how manywould of then went to + 200 had you of held.

Very hard to predict next 5mins let alone 150 pips
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
Quoting Turveyd
Deanoracer,

The issuewith bailing at 50 with a 200 sl is how manywould of then went to + 200 had you of held.

Very hard to predict next 5mins let alone 150 pips
maybe... Sorry I did not relate my point more clearly for your...

your free to run with those massively huge stops - whatever works for you.

I do not need to...

Happy Trading
Craig Harris taught me a technique when faced with a loss stop and reverse and double up your original position but don't look for big moves only to recoup your loss possibly a small profit.
'Let The Market Guide You To Trade' MWMW
Quoting deanoracer
maybe... Sorry I did not relate my point more clearly for your...

your free to run with those massively huge stops - whatever works for you.

I do not need to...

Happy Trading

I'm more of a 5 + spread SL kinda guy personally!!

Just saying, in the 200pip game what's going down and at -50 could easily turn at -51 so closing at -50 might not work out that well can lead to multiple exits and death by a 1000nd cuts.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
Quoting Pipanator
Craig Harris taught me a technique when faced with a loss stop and reverse and double up your original position but don't look for big moves only to recoup your loss possibly a small profit.

I've been toying with that idea recently, the only issue is how many losing trades you can make in a row ofcourse.

If you trade a random entry method with say a 50-100SL you'll pretty much get a 50/50 win rate, so the odds of 10 losers in a row are about 1024:1 I think, but every 1000nd trades you possibly wipe out your account.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
Quoting cougar73
The only way I know to rescue a failing trade is to plan for this eventuality ahead of time using fti's (TAF thread) rescue skew. What you're doing here is re-averaging the price of the starting trade with more pieces than you started with. fti trades without a stop loss...and he'll be the first to say that not all trades should be rescued.

Take the amount of money you want to risk and divide it into either 20 or 32 pieces. Each piece is called a Scout. You're essentially scaling in with price and scaling out with the TP's. The rescue skew is...
This does not and will not work, yes it will have a great run and all great, but eventually you'll be forced to take a all positions in loss which will wipe out about 200wins as easy as, so 6months of good trading wiped out in 1 trade.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • Post# 60
  • Quote
  • Dec 15, 2012 8:47pm | Edited Dec 16, 2012 1:01am
I see the idea of 'rescue' as nothing more than an accounting trick. What you're really doing is adding new orders that will generate P/L in their own right, and how you group these (and any other) orders mentally is nothing more than arbitrary. Everything else being equal, all orders contribute equally to eventual bottom line.

If you're going to place additional orders, the key question has to be: would you take this setup anyway, even if your previous order(s) weren't in loss? If the answer to that question is 'no', then the probability of digging yourself deeper into the red is greater than the probability of recovery. The market is going to do whatever it will regardless; and the P/L of your previous orders is irrelevant.

IMO the problem is that we tend to think of each 'trade' as a unit, and that mentality runs the risk of becoming preoccupied with its P/L to the point of losing sight of what the market may be doing (in the case of a discretionary trader), or of our overall trading plan (in the case of a mechanical trader).

Instead, I try to look at the overall picture. For example, if after cutting a loss, the market moves another 30 pips against me, then my eventual bottom line will be 30 pips better off than it otherwise would have been. Hence the exit is effectively the same as a 30 pip win. Of course it could be asked: but what if the market had moved 30 pips in my favor? Well, that brings us back to the probability analysis in the second paragraph. If the probability is in favor of price reverting to a mean, then the second setup (i.e. averaging down) is valid. But if you can not ascertain probable market direction at the time you add the rescue order, then you'll improve your situation approx 50% of the time, and worsen it the other 50%, making the rescue attempt problematical.
I'm taking a rest from forums. Please don't expect replies to your posts.
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