NQ Positioning

Discussion in 'Index Futures' started by Whamo, Sep 1, 2002.

  1. Whamo


    I am currently trading the NQ's w/ 2 contracts and exiting 1 contract at +4 points and letting the other contract ride. Initial stop is 4 points below entry which is moved up to + 1/2 point (to cover commission) once the +4 point contract is exited and then it's a 4 point trailing stop from there. My question is about adding a 3rd contract; should I:

    1) Add a 3rd contract on my initial entry and take 2 contracts out at +4 and let 1 ride?

    2) Add a 3rd contract on initial entry and take 1 contract out at +4 and let 2 ride?

    3) Or add the 3rd contract after I take 1 contract out at +4, maybe around 8 points above my entry if it looks like the trend will continue.

    I try to only trade the mornings and my system has gotten me into some decent 15 to 25 point moves so I am leaning towards trying to let more contracts ride on the back end.

  2. whamo, this is one thing I never understood. And my scepticism I think is supported by system testers. This whole scaling in and peeling off is nothing more than a pshycho bandaid to help traders feel better about risk.

    I mean think about it. Is taking a target profit ever a good idea? Is it only a good idea sometimes, or is it over time the best idea?

    A small profit, a medium profit and a large profit make a medium profit. Why not just always take a medium profit?

    I have heard money managers bemoan the fact that traders take small profits. Then they will turn right around and tell you to trade in 3;s and take a small profit with one unit. Well, if taking a small profit is bad, why would you want to commit a third of your trade to a bad idea?

    Same with hanging on for top dollar. is it now ok to hang on because I already took a small and a medium profit? How will my previous trades somehow affect the outcome of this last unit?
  3. I think 5 pts is better for trailing stop , based on my experiences.

    or have you done some backtesting to show 4 pts is better?

    or do you let the nq go 4 pts against your paper entry level
    and then enter the real time order ?
  4. I spent a bit of time stuffing around with this type of thing for a while and I will tell you staight up. The trailing stop / let it ride approach will give you bigger gross returns. The profit target approach may give you a smoother equity curve but will not make anywhere near the type of potential return you could get with letting your profits run.

    Those thrust days up or down when you just enter and the market goes in one direction all day. 40 or 50 point days. Over a year you might only get 10 of them and they will end up accounting for 50% of your total yearly profit. The rest of the time you're chipping for change. Use your first contract to cover costs on entering three and stay in as long as possible on the other two. You'll never clean up with a profit target.

  5. runningbear, MY POINT EXACTLY! Then why in the first breath (the second being where you say you will never...) do you then suggest cutting the first unit short? Why I ask you is that a good idea for a third of your trade but a bad idea for the other?

    Because I can tell you, if I thought cutting it short would add to my bottom line, that's all I'd be doing. Forget about the big ride if the little one is making me money.

    But I don't think the little one is making any money overall. so it is a stupid idea to even incorporate it into the scheme at all.

    That was my turn, now your turn.

    (and if you have any studies on trailing stops, that is almost all I think about anymore, I would like to learn more, because I can't figure out a lot of things.)

    Also, aaabeltway did some studies showing a slight advantage to a profit target. So there is a whole lot going on in this mix.
  6. @profitseeker

    mr van tharp is calling this scale out thing "reverse position sizing" which means, its nonsense beside psychological reasons...BUT, if you are able to trade with multiple contract (lets say >10 contracts) + are trying to think it out, what could be the best position sizing algorithm or strategy, you could easily end up in hospital. its a science in itself.

    :) trading
  7. Whamo



    I fully agree w/ you that it's a psycho Band-Aid, the primary reason for me to take 4 points is that I've had too many trades go a few points and then come back down to break even or just a very small gain or loss. If I take the 4 points on just 1 contract it will be a positive trade for my head than not taking it if it doesn't continue w/ the trend.


    I've been testing a 4 point trailing stop, a break of the 15 EMA on a 2min chart (got the idea from someone on this board who suggested an 8 EMA on a 3min), and the decrease of my trend indicator. Not sure right now which I like best for my exit.


    I do like the let it ride concept, I've jumped out of too many long trends just to sit on the sidelines w/ out any positions...