the intra day envelope trade filled me a couple stocks today when the plane crash news hit.i worry that this could realy hurt you if something big happened.how to you protect yourself from this happening.
I am always in full throttle... But I do add to winners from time to time... BUT only if it so happens that the market is gracious enough to provide yet another set-up/opp while I am already in one... PEACE and good trading, Commisso
I think scaling out of a position,especially when you're not totally certain of the next move,is an excellent way to liquidate a position. For example,you're long 1000 shares and you're up half a point,and you're not sure which way the market is heading next,it's good to sell maybe half of your position and lock in a profit,and hold on to the rest to see what happens.If by some reason,you end up washing the half you held on to, at least you made some money on the other half.
But if you enter with all and scale out with partials, then what happens when you're wrong? You get hit for the 'all' on the incorrect trades, and limit yourself on the correct trades. FWIW, I subscribe to the 'all or none' school -- for both entry and exit. - 3dog
From experience I know the kinds of moves my trades generally capture (20 - 50 cents, depending on the price of the stock). Like all of us, I've had the experience of closing out a trade, only to watch it keep going my way for 3 or 4 times what I took. Because these events don't occur too frequently, I take a profit on my whole position about 75% of the time. On certain occasions where I believe the price could go further, I'll pare out half my position and hold on for a bit more. I've had mixed results doing this, and though I haven't measured it (I should have!), I'd estimate that the times I've taken less profits than if I'd taken the original exit. (My problem is that I don't let the price retrace enough - and end up taking smaller profits too often). Have you tried scaling into a trade and taking a profit on a full position? This could be worthwile, especially if you find that the price moves against you a lot of the time. (Of course, you could just work on your entry skills, to minimize the adverse excursion.) Daniel
First off, get the "bestiality" off the board, this is a family place.....what the heck is that bear doing, anyway... Since we like to be pretty sure before entering a trade, we get in with our normal share size (say 2,000 in my case). If I were to only want to buy 1,000, I look at it like "maybe I'm wrong" - so we tend to enter with the whole chunk. Hey, if we're wrong, we can get out just as quickly, and even flip to a reverse postion. I am guilty of "scaling out" of positions...taking some profits....with this in mind. If I buy 2000 shares, it goes up 50 cents, I sell 1000, and if it goes back a quarter or so, but the market looks good, I may just buy the ripple....and be back in for the 2000. If it were to continue up after selling half, I'm still happy (although I have "lost" half of the additional profits)...kind of a "glass half full or empty" scenerio. Most importantly -- you need to be in the trade with a quantity that makes you very serious, without being "freaked out" - don't ever do too big of size....(didn't expect to hear that from a "firm" guy, did you)...but it's true, traders tend to freeze when they have too big of a position.
Well, I guess it depends on the setup. For one of my systems I go full size (although I keep some buying power in case of trouble). For another one, indeed, I will never go full size first, because the entry is risky, I will add on the retrace. In rare occasions I am ready to add the winning position with extra buying power. But this sizing is always a tricky issue. Some traders never scale in or out and consider that scaling increases risk. However, I know several successful traders, well I do that too anyway, who would not do it otherwise and it's part of their edge. again, it depends a lot on the type of trading too. some styles really are not scale friendly.
You're right about the cash management aspect of entering trades, since you want to leave enough "ammo" to enter another trade that may look even better. We really don' t run into that problem here, which is nice....and I know it's tough to do (hold back sometimes).... Is your margin calculated upon order entry or when you get filled (with your broker)..??