There's not much one can do to resolve the fact that if one wants to go for the big moves, he must be willing to sacrifice many of his smaller open profits, IMO there's just no way around it. Do whichever suits your personality -- I'm still deciding for myself.
Gringinho, What's your time frame? Are you scalping mostly? I go after 30+ ticks intraday moves. If you're scalping then entries are very important for you. For me entries are not that critical. Chinook
I agree 100%. This is always a dilemma for me. I always decide what will make me happy at the moment, or cause less self-beating afterwards. For instance, on Friday I let go 25+ tick profit in favor of an upside move then ended up getting out of the trade at breakeven. During Greenspan's speech, I took a nice 40+ ticks profit and then watch the EurUsd go up another 80+ticks and I couldn't re-enter. On Friday, I remembered how I missed the extra 80+ ticks couple of days ago so I just hung on to my trade. These decisions were not right or wrong because you can never tell what will happen next. But in both cases, I made a huge mistake by not scaling out! I had multiple contracts and I couldn't manage the trades wisely. In both cases, I would have made >50% more profits. I think the trick is in scaling in an out in terms of satisfying yourself. It's the mid-way between all or nothing and you'd be more consistent this way. I still can't do it properly--I always end up doing all in or out. Maybe a simple way to do it can be like this. Let's say you enter with x contracts. If the market goes in your favor or goes against you little bit but still looks strong in your direction (other variables than just the price) then you can add another x contracts. When the market starts stalling or hits what you think is a support/resistance level then you can exit x contracts and keep the other x in the market and trail. I think this'll cause much less self-beating after the trade is closed. Does anyone have any wisdom to share with us about scaling in and out? By the way, I think for scalpers it's not possible to scale in an out since their time frames are very short. Chinook
I sorta like the "scaling" methodology. But it depends on when you enter. By scaling I believe then the trader does not need to be 100% correct on his signals (all in and all out). He would have several chances to be correct, by scaling. In Futures I traded a system 1.5 years ago that would enter a little later in the trend. I would scale in the Big S&P with 3 steps. I would enter short for example at each price improvement of 1 or 2 ticks. I would take the chance of not getting all of my contracts in, but it executed at each half hour which seemed to be where the stall and volatility would occur. I would exit at a pre-set targets 5, 10 and 15 points or MOC. If MOC occurred (happened a lot in the low range environment the ES has exhibited) then this "1 tick step" trailing strategy would be attempted in the last 15 minutes... But this is Forex and when the trend moves it REALLY moves and this strategy seems to be difficult to execute. Michael B.
Hi, I don't trade forex (yet, but I follow your thread to learn more, as forex is my first option to diversify away from US index futures, ES/NQ/YM which I've been trading for several years), but indeed I find scaling to be very beneficial. But a lot depends on your strategy as well. Because (unless you use multiple stops loss orders, which is a bit rare) you'll be taking a loss with your maximum position size and if you don't let your winners ride, there might be a problem. Btw, I've done quite a bit of testing with mechanical systems, long term trendfollowing currencies. Scaling hurts overall profitability (i.e. you make less profit) but improves the ride (makes equity curve smoother). This means that you can achieve the same profit by increasing leverage. It also allows you to have more %wins, whichmakes it easier for your psyche What other variables besides price are there in forex?
Chinook, I've been experimenting with scaling and position sizing 250 pips back on stop with a total pip loss "budget" of 2500 pips that means I have VERY small positions on initially and scale in when it goes against me. This is a range methodology, And since I think we still stay in range for the foreseeable future it been working very well for me. I notice that by having tight stops you seem to give back a lot of what you make. I suggest you try my method to see it's more profitable -- BUT you must understand scale. IE to trade like this your initial position is 1/10 to 1/12th your normal position,
Scaling in or out has to do with what you believe to be "risk". If you believe that the greater risk is in entries, then you might find it more comfortable to scale in. Same thing with exits, if your risk is "missing out" on an extended move, than you might feel comfortable scaling out. As far as profitability, with the way I trade, I make more with an all in/out type of strategy. Also, for me, the longer duration my capital is exposed to the markets, the greater the risk.
I remember that move, if you wanted the 100+ pips you had to watch your 40+ go back down to 10 or so before resuming the advance, the only problem is that the retracement looks just like all the other times a 40pt profit goes back to 0 or less.
I think the scaling out targets for S&P are OK but scaling in at 1-tick intervals is too tight. You might as well have entered all at once...I think this is more scaling out than both scaling in&out. Chinook
In this case there'll be multiple stop losses. Otherwise, you're right you'll be taking the max loss. For instance, for EurUSd you can look at the cable, bonds, lately crude oil for intraday moves. Of course, the correlations come and and they don't work all the time.. Chinook