full size entry or average into full size?

There has been alot of posting recently about business plans recently, I have been tweaking mine a bit.

Was wondering what every one does for entry. Full size on entry or scale in. And what is the reason you choose one or the other.

Pete

 

Logically, I can't think of a good reason to avg. IN to a position

-FastTrader

 

I wasn't clear about scaling. I meant scaling UP as it moves in your favor.

 

OK...for clarification, is this what you mean:

You get a Buy signal on the ES at 990, you go in with 1 contract. ES moves to 994, you buy another contract at 994?

-FastTrader

 

I scale in. As much as I may think it is a high probability setup to enter, there’s never any certainty that it will work out, so it doesn’t make sense to me to load the full size on the initial foray. If the market begins to show me that it can and in fact move favorably, I’ll add.

Kermit

 

Kermit, doesn't that bring your avg. cost basis for each contract higher? So, if it moves against you a little, you're back to break-even?

-FastTrader

 

Adding on to a position can work very well for a 2 lot and higher trader.

Scaling out of a position can also be very effective to reduce risk while holding out for maximum profit. This is how I manage my intra-day trades on the YM and ES:

YM short this morning:

Sell 2 at 9148, stop at 9163, buy 1 at 9128, trail the 2nd;
New sell signal:
Sell 2 at 9125 (total 3 on), buy 1 at 9105, trail the remaining 2;
New sell signal
Sell 2 at 9105 (total 4 on), buy 1 at 9085, trail remaining 3;
Possible trail stop at 9094.

Biggest risk was 15 pts on 2.

Each partial profit allows for a bigger cushion to add-on to a move as it continues without exposing yourself to maximum risk at the beginning of a trade.

 

Yes, it can, and for me, it’s a tradeoff. As per your example, if I enter 1 lot at 990 and then another lot at 994 and now the market pulls back to 992, I’m at break-even. I guess one can also look at how and when to add. My reason for scaling in is so that if my entry happens NOT work out, I am out just 1 lot instead of 3. I am testing the waters before committing more to it. If the market shows weakness, it’ll be evident shortly after my first entry and it will only cost me 1 contract to find out. One the other hand if there is further show of strength followed by a normal pullback, I’ll commit my 2nd and 3rd contracts each with it’s own stop loss.

Kermit

 

I know some traders that consistently and successfully scale in via multiple entry signals...

I tried a few different scale in methods myself and didn't do so well.

Recently, someone showed me the below scale in signal method they use.

For example...lets say you have a trade setup based on Bullish Divergence and ES bottoms at 934.00 on the intraday chart.

(maximum contracts for this trader is 9)

Then that trader gets a Long signal @ 935.00 via a Bullish Divergence setup...

that trader then enters 3 contracts...

ES moves up to 940.00 and pulls back to 938.00...

That trader waits and see with a good stop in to bank profits from what's left of the uptrend just in case it continues back down...

during the price pullback he goes in with 3 more contracts via a support bounce off some support level within the price pullback...

price moves upwards and suddenly the trader gets an Ascending Triangle BreakOut signal and enters with another 3 contracts...

to bring the total position to 9 contracts.

What about profit targets?

There are profit-targets for each 3 contracts...the first 2 sets of 3 contracts...their profit targets are ignored and trailing stops are used to manage the position to lock in some profits just in case the price pullsback deep enough prior to the next 3 contract position being entered via a trade signal...

Then...only then...if all contracts reach the profit-target that was designated for that last 3 contracts...you exit all 9 contracts at that price-target.

(Note: All trade signals above and contract size are for example only)

Simply...all scale ins are not random nor at a fixed price entry target and occurs via actual trade signals.

Therefore...no trade signal...no adding to the position.

Seems to me the key for scaling in (adding to a profitable trade) successfully is treating each group of contracts as a trade all by themselves...

in hopes reaching the profit-target of whatever trade signal you get for the remainder of the scale in.

I myself plan on testing this scale in signal method soon next month after I complete testing something else this month.

It should have better results for me than the other scale in methods I've tried in the past.

NihabaAshi

 

This is essentially the procedure that Wyckoff recommended, i.e., that each add'l amount be at what would be a "continuation" entry. Thereafter, all shares/contracts have the same stop.