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.
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.