I think people are concerned about the trailing stop loss actually getting you out at a good level and not blowing through it so bad that you lose far more than you intended on those 30 contracts. But that's the risk of using stop loss orders of ANY kind. Regardless of the debate, congratulations on your trading Neet
Sponger, I understand your concern but that's a risk every trader with a large car size has to take, no? At least the trader who's scaling up has some profits in the bag if the car size has increased substantially, sort of like a buffer, to further protect against a violent move against you. Like I said, this money management methodology is psychologically hard to accept and take but in a trending cycle it's a work of art. During heavy choppy action and/or consolidation ranges it's not a great technique but when and *if* you get stopped out the losses will be minimal. I mean, what is the goal of most traders ? To keep losses at a minimum, to allow the winners to ride and to get the trend right, correct ? This offers it all. ...and thank you. Neet
I actually agree with scaling in to winning positions. Wait a minute, it just occurred to me that I missed something someone said earlier, and reread your posts. Are you adding more contracts like this: A) sell 1, sell 2, sell 4, sell 6, etc Or are you adding like this: B) sell 1, sell 1, sell 1 etc If its A, then I now understand some other posters comments about getting hurt when things go awry. All of the scaling theory I have studied states that for money management purposes, you must add in a reverse pyramid to get to your max position size. Like this: Sell 10, sell 8, sell 6, sell 4, sell 2. That way, when the trade reverses on you, you are losing on the smallest add, and still winning on the large majority of adds. Just something to think about. I'm trying to trade exactly the same way you are - watching price, support and resistance, trendlines, and patterns. Its not easy - I think it takes a lot of sreen time to get to be successful this way. But its pretty pure and to the point.
Sponger, Ok, this is an example of how I ride trends. Let us say *I think* the trend is about to go up. We never know for sure, I certainly don't, so I start small. 1 Car Long I now wait to get stopped out, or for my theory to confirm. If I get confirmation, I add 1 or 2 Cars, depending on price action, this means the trend is in fact up, for the time being. At this point Im probably securing profits on the first car or at the very least moving the trailing stop of the original car to break even territory. Always with a trailing stop, never a sell or cover order. I'm an atom in this universe we call the market, if the market says the trend is up, we stay we the trend. As the trend develops, I ride it by rinsing and repeating or getting stopped out. Every add has a different trailing stop. The more I added, the more money I made. The less I added the less money I made. The trade ends when i get stopped out, when the market decided to end the trend not when I *thought* it was time to end it. Neet
Gotcha Neet Ok, during the course of a trade, you may choose to scale out or go all out depending on the price action of the trend. Some questions for you: 1) If you are riding the trend, and have started to pyramid, what is your price action rule that would act as the trigger to start scaling out and exiting the first few contracts? 2) Again, riding the trend, what is the price action that triggers you to hold the entire 30 contracts until you go all out? How do you distinguish when you should scale out vs. going all out? Sponger
Two points for the OP. The first is that this is a great way to trade if you have iron discipline. Second is - I get the impression that 30 cars (that's what you ended up carrying?) represents a bit more than the optimal position size given your total equity. I have a feeling that you understand risk management quite well, and are aware of this issue. I'm not sure if I would try this (scaling up so that a small move in the instrument represents an inordinately large move in your total equity) in the grains or in a single stock, which are more likely to be halted for huge news. You said you had 'secured' profit on 23 cars at the end, but I assume you mean you had an unrealized profit and the position was still fully on? I guess I'm a bit of a worrier but a profit is never secured for me until the position is closed. Correct me if I misunderstood this.
First point, discipline, i do, rock solid. Without it this business is suicidal, literally. Second point, car lot. I trade the YM, I think 1 car for every 2.5-3.5k in your account is not overleverage. What made you think you knew my total equity ? As far as unrealized profits. If I bought a car at say 000, and the trailing stop can't go below say 015, I pretty much consider 14 points money in the bank if the current price is above that, and I'm already including a point or two in slippage, especially if it's just one or two cars providing ease of liquidity. Remember, I did state that I have a different trailing stop for every position I add. However, technically, you are absolutely correct, they are unrealized profits but pretty much secured by the stops if you want to be realistic. Hope it helps. Neet