Exiting the Market - Hedging or Average Down

Hi All

I understand that both of these exit techniques require that you do not over leverage your account and they are not particularly main stream stop loss techniques , but never the less they are both acceptable statagies if used correctly.

As part of my own trading I trade the 1 minute chart and scalp the market for only 4-7 points and as a result have a high success rate, I only trade with the trend. What I then do is if the trade goes against me, at approx 30-40 pts I hedge the trade usually EURUSD and pass the trade to my 15 minute trending system, which I also use to determine the trend direction, so it works quite nicely. I then trade the 1min lossing trade back into profit on the 15 minute trending until in profit then close it.

Does anybody else use any similar sort of strategy or does everybody view it as to much of a risk, I think it would be great if we could discuss this.

I have also considered using Averaging down my position and trading it into a profit that way, but obviously slightly more risk involved, good money money management is a must for this for form of exit, I have considered using both.

If anybody uses or has an opinion on either of these methods I would love to here your views?

Happy Trading
wonderwoman.

The prob w/ this is you are only going for 5 -7 pips per win. When you move the loser (at -30 - 40 ) pips to the 15 min - you have lost the earnings of your prev 7-10 trades. If you end up taking a loss on the 15Min timframe - you've lost considerably more than that.
Eventually your gonna crash and burn

It is unfortunate that this method may have worked for you in the past - cause now u believe it works. That is a danger and a belief you'll need to reevaluate.

10 to 1 RR would mean you need a greater than 90% win-rate to have some kind of edge.

I suspect you have a very smooth equity curve, but if you do this frequently/often enough, sometime in the future, you may suffer a string of 3 or maybe more big losses, if not right after each other, then in close succession. In other words, you have a strategy whose equity curve looks like you're selling options/gamma - the Black Swan is your enemy.

One danger in this kind of trading is that you may assume your 90% or higher win rate implies that your losing trades will come infrequently, and far enough apart for you to make up your losses. If you do a study of "streaks" in a simulation, "bad luck streaks" will occur much more frequently than you expect. Even worse, the distribution of the size of those losses may be spread out - some at 40pips and some much larger (suprising news?).

All I can say is... ...good luck!

It seems to me that you are chasing the market... 3-4 losing "recoveries" in a row and yur broker will ask you an acc refund. Unless you are using some ultra-conservative position...

Cheers!

Thanks for all whom have replied to me. Well I really don't know what to say, although I have only been trading for 3yrs this was the first time I have traded in profit, I have spent the last 6 months paper trading the system which is an oscillator based scalping system on the 1min chart and although I have had quite a few trades which I have dropped to the 15min chart i has been manageable and I thought I had it under control, obviously not .

When I first designed the system, I tried all number of different types of exit techniques fixed stops trailing stops, pivots etc, but they always seemed to get hit and the market would reverse in my favor. I am at a loss of what say, I am usually a very positive person but I feel empty.

It appears then I will have to go back to the drawing board.

But anyway, thanks for pointing out the light obviously I was deluded to how good mu system actually was.

Happy Trading

wonderwoman x.

What's the problem? Why change anything? Because some people gave you their alternative views. Keep developing this strategy, to me it sounds like you are on to something that is yours and yours alone. Other perspectives should not matter prior to your own. If you truly are not overlevaraging you initial size, and are keeping on the right side of the money flow... then I believe you have something here - just watch out for those pesky reversals

MM