Do you add to losing positions if a new setup occurs?

Discussion in 'Trading' started by mmm, Dec 11, 2003.

  1. MMM,

    Very good question.

    This happens to me almost every day of trading to at least 1 trade.

    It's been that way for many many many years.

    Note: I don't use fixed stops nor fixed profit targets..my stops are always different accordingly to the chart pattern or trade signal. Thus, one trade may have a stop of .50 away from entry or another trade could have a stop that's 5.00 away from my entry.

    Lets make up an example situation based on your question...

    Lets say your Short in ES at 1050.00 and your stop is at 1052.50

    Market starts moving up...and price is currently at 1052.00 when you get another Short signal...

    Here's the key...you really need to know among your trade signals...which works the best in comparison to your other signals.

    Thus, if that signal that occurred at 1052.00 is not as good as the signal you got at 1050.00

    I wouldn't add to the position in that particular situation.

    However, if that signal you get at 1052.00 is a better trade signal than the one you took at 1050.00

    I would add to the position.

    The above is strongly dependent upon how well you know your trade signals.

    Now...lets assume your either don't know your signals that well to be able to decide which is better than the others...

    (ranking them via whatever ranking system you choose via either profits, win/loss ratios, % of times the initial stop was threaten...whatever)

    or that your only using one trade signal for all trades...

    If the first entry at 1050.00 (example from above) is still good and you got the same signal again at 1052.00 prior to hitting the stop at 1052.50

    I wouldn't add and let your profit target strategy or stop/loss strategy do their job because the trade is still good until either profit target is hit or stop is hit.

    NihabaAshi
     
    #11     Dec 12, 2003