Menu
Sister Sites

Options

Bookmark Thread

First Page First Unread Last Page Last Post

Print Thread

Similar Threads

Scaling into winning trades 1 reply

Scaling out of Losing Trades (MM) 5 replies

scaling in/scaling out - how do you do it? 2 replies

Scaling out of losing trades... 28 replies

Scaling out in profit 8 replies

Scaling: In/Out. Winning/Losing

  • Post #1
  • Quote
  • First Post: Sep 26, 2007 7:18pm Sep 26, 2007 7:18pm
Hi guys, {To the ladies I apologise that I am often Short PC.[BUT, I am a romantic. Flowers, Tell Her, Discuss the Money, Dinner & Wine... the whole 9 yards. And it makes me Feel Good but, don't tell her, She thinks I'm doing it for her.]}

I thought this could be an arena where some critical advice could be offered as it pertains to...
Account Size vs % Risk / Trade...

& Whether we believe "Averaging In" is the same as "Scaling Out."
I'm sorry that I don't have something snappy prepared to launch this debate but, please feel free to post Your views on the subject.

I do have some opinions tho'.
This should be an interesting thread.

First I'd like to mention that I work with a small account size ($500-$1000), partly from choice and partly out of necessity. I feel that I must first master $500 @ 400:1 leverage before I can risk $5000 @ 200:1 and so on and besides I want to have fun at this (betting the farm is not my idea of fun). I've tried using my full 2-3% risk at the beginning of trades(aprox. three 0.01 lots), but by doing so, I'm either forced to stagger my stops which usually leaves me with fewer lots going into profit, or I can stop the entire three lots at one point (@the median of all three stops). I find the pressure of doing either method is more than I want to deal with, so a better alternative for me is to scale in. That way I can laugh off a loss of 0.01 lots and I still have the other two lots to use if I wish. Before I enter the trade I set long term, medium term and short term profit targets. These are usually key sup/res levels and that's another story for another thread, but as profit on the first lot occurs I look for momentum in price action, to validate the addition of another lot. A good bounce off the 21 SMA really gets me excited and some times I'll even add two lots if there's something fundamental like a major news release to me give more reason for confidence.

As far as exits go, I use basically the same approach as scaling in, but in reverse.

Well that's it in a nutshell. I'm looking foward to reading how some of the big money guys handle this.
  • Post #3
  • Quote
  • Edited 9:07pm Sep 26, 2007 8:48pm | Edited 9:07pm
Did it a couple of times. Both kinds. Might be effective if used in the direction of the longer-term trend but otherwise is quite dangerous thus still requiring planning of a "give up" level in advance. "Scaling out" in mid 90's for me ended up with about 160% of annual profit with the maximum draw down of about 25-30% on the account. "Scaling in" over the period of 2000-2001 on one of the accounts was much less stressful with about 500% returns and no drawdowns on the principal. Now have some plans to apply "scale in" strategy for the reminder of this year if it goes as planned.
I think that the key element for success while using these techniques is not allowing a "scale in" case to turn into a "scale out".
2 positions when i decide to take a trade. i trade pullbacks in a trend or higher lows lower highs basically new trends

when the trend is strong and down for example i wait for a pullback. when i see it happening i take my first position. the reason i do that because sometime the pullback is too small especially when the trend is strong in that case i end up with the some pips when the trend continues. if the pullback is decent then i enter near a reversal bar/oversold stochastics my second position. thats my way of scaling in. i close 1 position when its 30-40 pips in profit. second one at breakeven and let it ride.
I was thinking about just this subject this morning, and how I could apply it to my newbies' thread.

As I'm developing my Fib skills, and focusing on pullbacks to confluence areas of Fibs and S/R I have decided to modify my approach in future.

My basic trade is 5 lots (1%) and essentially I only trade with the trend (at least my definition of it). Normally, using buy/sell limit orders, I'd bang the full 5 lots on at a predetermined entry point, with a stop loss setting that allows the % risk to keep me well out of trouble. If I need to re-calculate my stop I'll cut my lot size down to suit.

I'd thought this morning that, as I like to add in on further pullbacks to Fibs, as the trade moves in my favour, I could reduce my overall risk by starting with 3 lots, and then add in the remaining lots as I see how the trade develops.

I've been used to backing horses, and always insisted to my son that level stakes (win or lose) produces the best profits over a long series of bets, assuming odds and win rate give a positive expectancy.

So I'll be following this thread with interest as this side of Money Management/Trade Management is an area (one of many) that I need to refine. I never scale out of trades (or very rarely) due to the input I received in this old thread of mine.
Quoting Micro-MiniMe
This should be an interesting thread.

First I'd like to mention that I work with a small account size ($500-$1000), partly from choice and partly out of necessity. I feel that I must first master $500 @ 400:1 leverage before I can risk $5000 @ 200:1 and so on and besides I want to have fun at this (betting the farm is not my idea of fun).
I have a lot of questions about your post. If you don't want to discuss this let me know and I'll crawl back in my cave.

Since you stated that you don't bet the farm, how does 400:1 leverage make you a better trader than if you were 200:1?
  • Post #7
  • Quote
  • Edited 4:46pm Sep 27, 2007 7:52am | Edited 4:46pm
Quoting philmcgrew
I have a lot of questions about your post. If you don't want to discuss this let me know and I'll crawl back in my cave.

Since you stated that you don't bet the farm, how does 400:1 leverage make you a better trader than if you were 200:1?
I don't have much time right now, but the point I was trying to make is not that I'm I better trader because of my leverage/account size, but that I simple choose to work with less money in my account and as Bemac requested, I was trying to open discussion along the lines of how account size might influence one decisions regarding scaling in or out.
Ok, After reading your question more carefully I can answer it more appropriately by saying a higher leverage such as 400:1 allows me to work with more lots (be they one full lot, .1 lots or .01 lots in size) and this in turn allows more flexibility of order placements, order openings and order closings. If had a $5000 account I could use 200:1 leverage with roughly the same amount of risk per trade.

For example, with an account size of only $500 using 400:1 leverage I can safetly use a 30 pip stop loss on a 0.03 lot size or (three 0.01 lots).

The formula I use is:

(Acccount Balance ($500) X Risk (0.02)) / ( Desired Stop Size (30 pips)) / 10 = Acceptable Lot Size (0.03)


OK, next question please.
Quoting Micro-MiniMe
Ok, After reading your question more carefully I can answer it more appropriately by saying a higher leverage such as 400:1 allows me to work with more lots (be they one full lot, .1 lots or .01 lots in size) and this in turn allows more flexibility of order placements, order openings and order closings. If had a $5000 account I could use 200:1 leverage with roughly the same amount of risk per trade.

For example, with an account size of only $500 using 400:1 leverage I can safetly use a 30 pip stop loss on a 0.03 lot size or (three 0.01 lots).

The formula I use is:

(Acccount Balance ($500) X Risk (0.02)) / ( Desired Stop Size (30 pips)) / 10 = Acceptable Lot Size (0.03)


OK, next question please.
Where does leverage come into play using that formula? Please understand that I'm not trying to pick on you, I just want to appreciate how leverage is helping you.
  • Post #10
  • Quote
  • Edited Sep 28, 2007 7:43am Sep 27, 2007 6:30pm | Edited Sep 28, 2007 7:43am
Quoting philmcgrew
Where does leverage come into play using that formula? Please understand that I'm not trying to pick on you, I just want to appreciate how leverage is helping you.
First let me clarify that the formula is for non-USD based pairs (Eur/USD, Gbp/USD...) just don't want new traders to us it for USD/JPY...

As far as leverage goes... duh, I guess there was no need for me to mention it in this context, as it seams to take care of itself with the formula, although...

it may be an important consideration for new traders to be aware of the fact that Forex brokers often mention the different amounts of leverage they offer. To be quite frank, this is something I've taken for grantid for since my first live account. I opened my first account with $250 @ 200:1 leverage (what did I know at that point?). I was somehow able to double the account in less than a month. Then, "YEE HAA! Let's go ta town!", I said. "Time ta start doublin up soz I can git rich fast"!...

Yes, I was in over my head. Still am in many respects. I'm going to go tell my mommy you hit me in the head with a very hard question now. In the words of the great Isotonic "Would someone please unvouch me, now?"
Quoting Micro-MiniMe
Yes, I was in over my head. Still am in many respects. I'm going to go tell my mommy you hit me in the head with a very hard question now. In the words of the great Diallist "Would someone please unvouch me, now?"
Now don't go making me feel bad. I just wanted you to understand that as a responsible, stop-using trader, leverage doesn't do much for you.

Now, if you don't use stops and you take on 10 different positions at a time while doubling down every -10 pips then leverage would extend the time until you blew up but you don't seem the type.
  • Post #12
  • Quote
  • Edited 7:49pm Sep 27, 2007 7:39pm | Edited 7:49pm
Quoting philmcgrew
Now, if you don't use stops and you take on 10 different positions at a time while doubling down every -10 pips then leverage would extend the time until you blew up but you don't seem the type.
Ouch!
Now that would just be down right crazy. I have contemplated a no stop strategy before, but that's like having unprotected sex with someone you don't really care about and I think that discussion is better suited for the funny farm thread.

BTW: PeterFM, Thanks for posting the link to an earlier thread of yours. Great stuff! I personally was impressed by a post from bunyraider. Looking back at many of my trades I now realize that scaling out wasn't the best option many times. Scaling down in a confusing market might be ok, but when you get a clear reversal signal GET OUT!
  • Post #13
  • Quote
  • Edited 11:35pm Sep 27, 2007 11:16pm | Edited 11:35pm
Quoting Micro-MiniMe

For example, with an account size of only $500 using 400:1 leverage I can safetly use a 30 pip stop loss on a 0.03 lot size or (three 0.01 lots).
Looks not much different than a nickel slot machine gambling to me.
Quoting philmcgrew
I just wanted you to understand that as a responsible, stop-using trader, leverage doesn't do much for you.
i know of 3 benefits of leverage:

1. you broker-bankruptcy risk is decreased, since they have a fraction of what they would have without leverage.
2. your broker-theft risk is decreased, for same reason as #1
3. you can trade more strategies on a single bank roll

and three harms (as far as pro trading goes):

1. have to keep close track of your margin so you dont get called
2. you can be forced out of a position by your broker, even though you are screaming "money is on the way!"
3. usually leverage is expensive in terms of borrowing costs

and like you said, all of these are minor points in the grand scheme of things.
Relax and be happy.
i let 1 cent a pip on usd/jpy every $100 i have ,buy of course, just to get some other cent swap

and since meta trader round up some pips to the nearest cent, i trade with 0.02 mini lot ( about 2 cent a pip) it gives 3 cent a day (bonus 0,4 cent every day compared with normal 0.01 which only gives 1 cent swap)

good glitch isn't it
Regarding the scaling out discussion, whenever I enter off a pullback in a trend I like to scale half of my position out few pips before reaching the previous swing high in case the chart unfolds as a double top/bottom.
Quoting Igrok
Looks not much different than a nickel slot machine gambling to me.
Yes, I agree. Too bad bad for me I started trading in 2003 with full lots and half a deck.

After no trades in 2006 I realized that I can still trade while I sharpen my skills without fear of becoming homeless.
Quoting Micro-MiniMe
Yes, I agree. Too bad bad for me I started trading in 2003 with full lots and half a deck.

After no trades in 2006 I realized that I can still trade while I sharpen my skills without fear of becoming homeless.
I understand. Been in a similar situation. I became a pro from the day one cause had no other choice but to make living out of it. Though didn't have the luxury of scaling trading lots and risk exposure down since no one cares how many pips I made or lost, but everyone around demands hard cash and everything has a price tag on it.
Buy 5 with the attitude that 3 are for Bonus Or giving? Is that it?

C'mon guys, we can do better than this.

Let's teach these young'uns some Wisdom.

Let's talk aboult a Scalp becoming a swing and then becoming a Position.
How do we do it?

How do we pull the ganchi required to Let It Ride without pulling 20p to kill the Trade.
I do it partially by visually examaning every Open Trade with the Question being..."Would I Enter This Trade Right Now?"

Personally, I like to think, that I have a grasp of Market Movement to the point of putting it into Graphics.

This idea has been recently re-enforced because my CPU time has been curtailed and yet. {Objectively} it still makes Funds.

This raises at least 2 Q?

1) Subjectivity?
2) Definability?

Master 2) and Smother 1).

TA Will Not Earn you the Biggest Buck, but, read right, should make you a few.

Pips to All
Quoting Bemac

How do we pull the ganchi required to Let It Ride without pulling 20p to kill the Trade.
I do it partially by visually examaning every Open Trade with the Question being..."Would I Enter This Trade Right Now?"
I like this Bemac. I've suggested this very thing to people who have trouble letting go of a trade gone bad. Step back, then look at your current chart as if you've never seen it before.
An effective way to get your emotions out of the way and determine if your trade is materializing/dissolving.
0 traders viewing now