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How to rescue a losing position?

  • #61
  • Dec 15, 2012 8:08pm Dec 15, 2012 8:08pm
Quoting hanover
I see the idea of 'rescue' as nothing more than an accounting trick. What you're really doing is adding new orders that will generate P/L in their own right, and how you group these (and any other) orders is nothing more than arbitrary. Everything else being equal, all orders contribute equally to eventual bottom line.

If you're going to place additional orders, the key question has to be: would you take this setup anyway, even if your previous orders weren't in loss? If the answer to that question is 'no', then the probability of digging yourself...
This post deserves a vouch.
NocturnalFX is no longer offering commercial services
  • #62
  • Dec 15, 2012 8:15pm Dec 15, 2012 8:15pm
Quoting hanover
I see the idea of 'rescue' as nothing more than an accounting trick. What you're really doing is adding new orders that will generate P/L in their own right, and how you group these (and any other) orders is nothing more than arbitrary. Everything else being equal, all orders contribute equally to eventual bottom line.

If you're going to place additional orders, the key question has to be: would you take this setup anyway, even if your previous orders weren't in loss? If the answer to that question is 'no', then the probability of digging yourself...
That's a true trader, regardless of his positions state you just do what you believe is right at the time, it might turn out wrong but if the probability is on your side you do it anyway without fear or hope.

Taking a 2nd or 3rd or even 4th position at cheaper prices we'll say Long is good, if the uptrend is still intact, your just taking advantage of noise, and great if the market then turns up.

Other issue is your putting a lot at risk, so if your a put 4 positions at risk trader which then gets to +$2 profit while risking $200 and bails your pretty much doomed you've got the have the confidence and the balls to hold and the ability to not over stay your welcome.

Newbies, if you haven't got years to even attempt to master all of the above and large supply ish of cash to waste in learning it ( demo isn't ideal ) then give up and walk away save your time and money.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #63
  • Dec 15, 2012 8:34pm Dec 15, 2012 8:34pm
Quoting cougar73
The only way I know to rescue a failing trade is to plan for this eventuality ahead of time using fti's (TAF thread) rescue skew. What you're doing here is re-averaging the price of the starting trade with more pieces than you started with. fti trades without a stop loss...and he'll be the first to say that not all trades should be rescued.

Take the amount of money you want to risk and divide it into either 20 or 32 pieces. Each piece is called a Scout. You're essentially scaling in with price and scaling out with the TP's. The rescue skew is...
Appreciate your sharing Cougar73, Auxesis. I know FTI is a much respected pro who really know his stuff.
Forex is my business
  • #64
  • Dec 15, 2012 8:36pm Dec 15, 2012 8:36pm
Quoting JR97
which begs the question of why are you placing trades if the most important part of a trading plan has yet to be established?
It will be my new business plan, my old plan still running now.
Forex is my business
  • #65
  • Dec 15, 2012 9:04pm Dec 15, 2012 9:04pm
Really appreciate all your responses guys, much thanks.

To prevent this thread turn into a debate whether to use stop loss/hedging, lets focus on the quest for the rescue method.

I have setup a poll to get a feel of how many traders are using such method, do vote please.

I will also update my post #1 to feedback any findings.
Forex is my business
  • #66
  • Dec 15, 2012 9:11pm Dec 15, 2012 9:11pm
Voted no...just believe that if you have a good setup you should know where it's invalid at. If it goes invalid, kill it immediately and eat the loss...doing anything else is relying on hope / gambling.
  • #67
  • Dec 16, 2012 1:28am Dec 16, 2012 1:28am
Quoting incomeideas
Just to share, I do have a 200 pips "protection stop" in place to protect my account
Unless you want to rescue your account, you should protect your positions with a tighter SL instead of protecting your account.
MT4/MT5 EAs/Indicators/Alerts coder
  • #68
  • Dec 16, 2012 7:20am Dec 16, 2012 7:20am
Quoting hanover
I see the idea of 'rescue' as nothing more than an accounting trick.
It's a lot more than that. By having a rescue strategy, it fundamentally changes the way you trade. Not only does it expand your time horizon for each and every trade, it allows you trade the market rather than setups - there is a distinction - as well as adding the psych benefit of few drawdowns (although the losses you take will obviously be bigger). A lot of what you say is true of a random walk, but the market's no such thing.
  • #69
  • Dec 16, 2012 8:25am Dec 16, 2012 8:25am
Quoting hanover
I see the idea of 'rescue' as nothing more than an accounting trick. What you're really doing is adding new orders that will generate P/L in their own right, and how you group these (and any other) orders mentally is nothing more than arbitrary. Everything else being equal, all orders contribute equally to eventual bottom line.

If you're going to place additional orders, the key question has to be: would you take this setup anyway, even if your previous order(s) weren't in loss? If the answer to that question is 'no', then the probability of...
Well said. In my approach to trading, I rarely rescue a trade (maybe 3-4% of trades are worthy of rescue consideration, let alone rescue). I want to keep my trading mindset on the offensive, looking for positive trading opportunities and evaluating set ups. Rescue tends to take me out of that mind set. So, why not take a 20 pip loss when the next "best" entry point is 50 pips below, where there is a high probablity that it will run back at least 70-80 pips to square up? Or, better yet, has the market signaled that your best trade is to take the 50 pip move (that would have been against you), then flip again to take that 70-80 pip move?

fti has been mentioned several times in this thread. Perhaps the most important lession to take from him is to keep a clear head, and to not be ridged in your trading. To one of hanover's point, if during rescue you can't clearly say that your second or third attempt at resuce is a normal trade for your trading style, you are at risk, and it is rare to find a trader who can keep a clear head in that kind of situation. So before you try to add a rescue method to your trading approach, ask the question, "am I really the kind of trader who should be rescuing trades?"
  • #70
  • Dec 16, 2012 8:48am Dec 16, 2012 8:48am
Quoting triphop
It's a lot more than that. By having a rescue strategy, it fundamentally changes the way you trade. Not only does it expand your time horizon for each and every trade, it allows you trade the market rather than setups - there is a distinction - as well as adding the psych benefit of few drawdowns (although the losses you take will obviously be bigger). A lot of what you say is true of a random walk, but the market's no such thing.
Well, OK then, but I still contend that:

(1) a trader's total P/L will always be the sum of the P/L of all of his component orders, and that anything else ultimately becomes a mere question of his personal viewpoint, which the market takes no cognizance of;

(2) that focusing on his P/L adds no value to his trading decisions, because P/L has no bearing on imminent market probabilities or behavior; and

(3) all of this is valid irrespective of whether the market is a random walk or not (for the record, I agree that it's not).
  • #71
  • Dec 16, 2012 9:16am Dec 16, 2012 9:16am
Quoting Turveyd
I'm more of a 5 + spread SL kinda guy personally!!

Just saying, in the 200pip game what's going down and at -50 could easily turn at -51 so closing at -50 might not work out that well can lead to multiple exits and death by a 1000nd cuts.
ok... trading isn't like that for me. I define risk, and re-entry potential with every trade - before I enter. I have never used a 200 pip stop loss... but that's just me.

Too bad I could not convey my point to you all.

Happy Trading.
  • #72
  • Dec 16, 2012 9:18am Dec 16, 2012 9:18am
Has anybody thought/tried using a reverse trailing stop. A trailing stop for when being in loss to try reduce losses.

Let's say the market is moving against you and you set a reverse trailing stop of 20 pips.
As the market moves against you the stop loss will be also moving against you but as the market moves in your favor the stop loss will not be moving. In this way you will be able to catch a re-tracement when it occurs and reduce some losses.

Regards
  • #73
  • Dec 16, 2012 10:32am Dec 16, 2012 10:32am
Quoting hanover
Well, OK then, but I still contend that:

(1) a trader's total P/L will always be the sum of the P/L of all of his component orders, and that anything else ultimately becomes a mere question of his personal viewpoint, which the market takes no cognizance of;

(2) that focusing on his P/L adds no value to his trading decisions, because P/L has no bearing on imminent market probabilities or behavior; and

(3) all of this is valid irrespective of whether the market is a random walk or not (for the record, I agree that it's not).
2 depends on where you enter though - if you enter with the goons then clearly not, but if you enter in the same spot as market moving forces, your P&L and their P&L is going to look pretty similar (aside from scale of course), and so subsequent behaviour will depend on how it fares.

I get what you're driving at - it's no magic panacea but it does encourage much better ways of trading so long as you've got your risk under control.
  • #74
  • Dec 16, 2012 2:29pm Dec 16, 2012 2:29pm
for every new position you enter you have additional risk...... if you are able to handle that, then rescue might be feasible however here is where the averaging down fails.

your losers are bigger than your winners....or worse yet....you get caught with a big loser that wipes out many previous trades.

if your first position was bad what makes you think your next one is better?

first learn to trade one position at a time.....THEN only THEN can you move on to multiple entries.Hanover has already mentioned that the bottom line is the sum of all positions regardless if it was a rescue or if you cut your losses and re entered.
AVT INVENIAM VIAM AVT FACIAM
  • #75
  • Dec 16, 2012 4:19pm Dec 16, 2012 4:19pm
Quoting the redlion
for every new position you enter you have additional risk......
Agreed, the extra risk is an additional consideration. I had discussed this in a reply to Turveyd, but then lost the post when my browser crashed.

Let's say, for example, the trader has added three rescue orders at 1% risk each, to his original order of 1%. Then he is staking 4x his normal amount on subsequent price movement; to justify this mathematically, the scenario currently before him needs be approximately 4x as likely to 'succeed' as the original position, and also 4x the likelihood of all past and future orders that are sized at 1%.

IMO this highlights the flaw inherent in rescue systems, grids, martingales, namely that the trader may be increasing his stake without statistical justification for doing so. As I have pointed out, P/L is not a valid statistical consideration, because the market takes no cognizance of it.

These MM systems are dodgy IMO because the trader ends up with higher sized positions on some trades than others, and unless he has statistical justification, he is merely playing a lucky game of hit or miss, as to whether the larger position sizes end up coinciding with winning, or losing, trades. Hence there's the possibility that one big loss could wipe out several smaller wins (or vice versa).

Bottom line is that there are only three positions a trader can take at any given point: net long, net short, or net flat. Hedging, rescuing, grids, etc are merely ways of describing collective groups of orders, as viewed by the trader. Regardless of personal view, the following remains objectively true: the only way to be profitable in trading is to be net long while price is rising, and net short while it's falling, frequently/heavily enough to overcome costs. The strategic issue lies in where (at what price) the trader adjusts his net overall position, in attaining this; how he views it personally, or the orders he uses to achieve it operationally, are mathematically irrelevant to his eventual performance.
  • #76
  • Dec 16, 2012 4:31pm Dec 16, 2012 4:31pm
Quoting incomeideas
Really appreciate all your responses guys, much thanks.

To prevent this thread turn into a debate whether to use stop loss/hedging, lets focus on the quest for the rescue method.

I have setup a poll to get a feel of how many traders are using such method, do vote please.

I will also update my post #1 to feedback any findings.
There's no one formula to answer the question as everything is risk defined, the best answer is the obvious; losing positions should have been exited long ago. However there are times when you're buying the dip or selling the rip, to borrow the phrase, you enter on what you think is the level or time, only to find price putting you in the rears, what to do? How many times have you been washed and rinsed stopped out only to see price quickly back in your direction and your scrambling to reenter, or the flip side wishing you'd had that stop in place way back there? Or to ponder the question, if the dip is still a dip and not a reversal?

Everything is defined by your accepted risk in your setup. If you're "all in" initially, one point, place and time, then you have little room to wiggle outside your predetermined setup. Taking larger risks here, double or nothing, will only blow up your account, it's mathematically harder to recover large losses.

Imho, and everyone here will have their own opinion of what works for them, ( which is the way it should be as we are all mentally hardwired differently for risk) pyramiding into a position has several advantages for money management, but here like Hanovers' accounting tricks and methods, re-averaging (not rescuing) the weaker entries and such are all just part of the entire trade as the whole is made up from the sums , the draw back in this MO is slight retracments normally won't develop into substantial positions, but you take what the market will give and the same can be said for the single entry, with tight stops and a good RR, 3+:1... only batting a third will make you profitable.

You never know how the right side of the chart will fill in, the only thing you can control is what you will risk in the market... don't let your position develop past acceptable limits where it needs rescuing, by doing so repeatedly you will eventually find yourself in a position that is unmanageable and past the point of returning. Game Over.

fwiw
  • #77
  • Dec 16, 2012 6:21pm Dec 16, 2012 6:21pm
From personal trial and error, you can spend days/weeks trying to "rescue" a losing trade. And all the while missing other great trades because you're fixating on a losing trade. Even if you "rescue" it you have gained nothing, really. something about time is money ?

Set your point of exit, take the loss and move on.... (IMHO)

There's a better deal (trade) just around the corner
When the Joker is in the deck.. fear not and play it well
  • #78
  • Dec 16, 2012 8:18pm Dec 16, 2012 8:18pm
"When you find yourself in a hole, stop digging"
  • #79
  • Dec 17, 2012 3:20am Dec 17, 2012 3:20am
So, it is evidently correct to say that there are rescue methods.

The question lays whether to use or not to use them. Using them would require resources = time + guts + capital + skill + plan, the outcome will depend on trader's capabilities to plan, execute and exit precisely.
Another consideration is with all these resources, would it be better to just close the loss, and use them for the next setup.
Forex is my business
  • #80
  • Dec 17, 2012 7:35am Dec 17, 2012 7:35am
Quoting incomeideas
Another consideration is with all these resources, would it be better to just close the loss, and use them for the next setup.
The best solution is to take the loss, forget it and concentrate on your next trading opportunity.

As said by someone earlier, during the time you are rescuing a position, your mental is fully dedicated to it ... and you will loose all other opportunities ... and of course, this isn't a guarantee of rescuing success.
MT4/MT5 EAs/Indicators/Alerts coder
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