Scaling out of Losing Trades (MM)
I am wondering if anyone has read anything on the top of scaling out of losing trades. PhillipNel used to do this with some of his losing trades, but his approach wasn't systematic. What I mean by scaling out of losing trades is the following:
Suppose I go long EURUSD at 1.4000. Let's say the trade goes against me almost right away: Price drops to 1.3975, so I close say 1/3rd of my position for 25 pip loss and keep the other two thirds in case the market turns around. The market keeps going against me: 1.3950, so I close 1/3rd more of my position. Then the market goes back up to 1.3975. So I close the last 1/3rd of my position. For an average loss which is much smaller than if I had a single stop loss of say 100 pips.
The point I am trying to get at is that I think losing trades are equally important in being handled properly as winning trades, yet there seems to be an asymmetry in what traders do.
That is exactly what i have been looking for on the web. I can't find any money management EA that will scale out of losing trades.
The only one i found was manageTPV2-4 but it doesn't work very well.
If you find something please let me know..... Im glad you bought it up
find trader888 posts ...
Im pretty sure the EA worked on taking out the trade in 4 lots, but as the trade went back in the favour it picked up the lots it dropped or something like that (cant remember exactly but I do know that he said it was quite profitable).
It may also work/ or is an anti-martigale (add as the trade is winning and cut back as it is loosing)
The most systematic quote from trader888 I was able to find is this:
I typically took about $500 a pip position and if the market goes against me by 200-250 pips i would cut 1 bar then every 100 pips down i would cut another 1 until either my position is closed or it goes back in my direction i would add $200 a pip to my position every 50 pips in my favour. If you can get the overall larger trend right then you can make money this way. Just note that these values (200 pips 100 pips etc) are not absolute values I might see ranges that I like and these might be 400 pips away so I might take a smaller position initially to ensure I can comfortably sit until those levels are reached should my position be wrong. So I dont get squeezed out of a position. This cause about 10-15% drawdowns when calculated against budget to be reached. Its not always easy and sometimes its just better to wait and see...I however liked to be in the market as much as possible because then you really focused on where it is. Not trading with my own money made it very easy to throw a line in the water just to see what would happen. Many a time that was the start to a great trade and sometimes it went against me but still managing it properly reduced the loss, although still a loss. It wasn't my money...that helped a lot. So if I can be permitted to give another piece of advice to newbies: DONT TRADE WITH MONEY YOU LOVE.
Not very systematic. Is there anything more systematic?
I am skeptical of profitable EAs but if you can ask him what the EA is called so I can look at the logic behind the MM I would really appreciate it.
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