Better yet there are strategies where adding to winners is easier. Day trading - Difficult. Swing trading - easier. With all markets there are going to be periods of retracement and consolidation and correction and eventually trend reversal. I happen to prefer futures spreads because they model and ‘behave’ better than flat price outright instruments.
Yes, there have been quite a few corrections. If you model Weekly data, it will make more sense to you. The March uptrend is intact.
Adding to winners lowers raises your average cost. A small move against you becomes a loss. Only add if you feel price will still go in your direction, and if so, why not just go in with your entire position?
Look, when you make a position, it's because you think price is going to go in a precise direction, right? Otherwise, why start? What signal could price give you to make you think it's going to continue to go in your direction? I'm legitimately asking. How do you get two buy signals without getting a sell signal in between? If the answer is "indicators," I know you're not a winning trader. "BUT, IF STOCH GOES UNDER TWICE BEFORE GOING OVER THAT'S TWO BUY SIGNALS!!!!!" The only time I have built a position that was already on was when I was adding to losers. Is this the easiest way to trade? No, it might be dumb. BUT. It makes sense because a small move in your favor = profit. Just kidding, don't add to losers. Adding to winners means you have to be super right or your small gain turns into a small or big loss. Buy 1 ES at 20,000. Now it's 20,005. Add another! Average cost 20,002.5. Now price goes down to 20,000. Whoops, instead of being at even, you're now at a loss!
But, there's one way to do it here: https://www.elitetrader.com/et/threads/one-trade-to-1-million.216617/
Thanks guys, I think there was some great points made here. Actually had one of my best trades in ES on Thurs by adding to a winner.
How and why did you add? Was it to do with the price action? The trick I've found is to add on moves where you can feel that everyone is trapped and the market is not letting them out (at a nice price, ie a retracement). Hence you get the air-pockets when everyone realises at the same sort of time that a) the market is not coming back to help them, b) prices look really weak, and so c) better dump them at market. That of course forces the price down even move (with hopefully you having a 1.5 or even 2x position!). As to when to cover, it's always the hardest question to answer in all of trading...
My method was I had an initial entry that I got in when ES dipped on the open on Thurs and got rejected from a volume node from the ETH. I had 5 lots MES with a 5 lot stop below the low. Then once it had gone my way enough to convince me that I was right and the low was in, I was looking to add and was fortunate to have it pull in to the RTH vwap, it stalled there and I was suspicious of it, because ES often overshoots vwap to washout weak hands. Sure enough, it did that and I added 2 lots after I saw that. I had a 2 lot stop below that short term low and treated it as a separate trade. I was tempted to add on the next pullback but this was a HTF idea on the 15min chart and I wanted to keep my avg price in a certain zone, so I could give it enough wiggle room to let it play out without being shaken out. But since it went so far so fast, I thought there was a high probability of a deep retracement and with that in mind, seeing the capitulation on one of those upswings I scaled out 2 lots, and put a stop for the remaining 5 lots under the recent pullback. I was still planning to buy back in later after a deep retracement... when ES moves .5xATR relatively fast, there's often a deep retracement to that move, in this context. So I still thought it could go much higher, but that's why I did what I did. I don't think I executed the add in the way you would have, because that retrace to vwap allowed some shorts to get out. But in my mind, it made sense as it likely also trapped some new shorts, and the washout below vwap stopped out some longs which then FOMO'd back in. I'll try to upload a chart of the execution here.