Hi everyone.
I recently finished reading a book!
prett cool huh?
Oh yeah, the point of this post... It was a biography of Jesse Livermore which although he was a stock trader it had a lot of interesting ideas. One that I am looking into for my trading is essentially a scaling in method (which I didn't normally do).
He would do what he called "probe" the market. This involved a couple of smaller trades followed by the balance once they proved profitable.
Example.
First trade for 2% of your 10% that you eventually want to put in.
Second trade for 2% once the first trade was in profit, never at a cheaper price. The idea is to test the market to make sure your idea is correct.
Third trade for the balace once the first two are in profit and have confirmed their direction. He would even do this again so the final trade was only 4%.
While this means that your average price is higher (or lower if going short) it (according to Jesse) reduces the risk to your capital and assures a higher chance of success.
My normal stragegy goes all in at the price then scales out slowly with take profits and manual trailing stops. This is an interesting idea that I'm going to look into and which I thought I'd pass on.
I recently finished reading a book!
prett cool huh?
Oh yeah, the point of this post... It was a biography of Jesse Livermore which although he was a stock trader it had a lot of interesting ideas. One that I am looking into for my trading is essentially a scaling in method (which I didn't normally do).
He would do what he called "probe" the market. This involved a couple of smaller trades followed by the balance once they proved profitable.
Example.
First trade for 2% of your 10% that you eventually want to put in.
Second trade for 2% once the first trade was in profit, never at a cheaper price. The idea is to test the market to make sure your idea is correct.
Third trade for the balace once the first two are in profit and have confirmed their direction. He would even do this again so the final trade was only 4%.
While this means that your average price is higher (or lower if going short) it (according to Jesse) reduces the risk to your capital and assures a higher chance of success.
My normal stragegy goes all in at the price then scales out slowly with take profits and manual trailing stops. This is an interesting idea that I'm going to look into and which I thought I'd pass on.
