Scale into on weakness or add on strength?

Discussion in 'Strategy Development' started by aspenboy, Feb 17, 2006.

  1. Dumb question to enter in uptrend on retracement/pullback to support/prior resistance. Would you recommend-A-entering initially on weakness towards support and then add on confirmation uptrend is resuming or -B- wait for confirmation support held to enter initially and then add to on subsequent strength?
    Does this make sense? I'm hesistant to average into based on other's advice but have been getting faked out some lately only to see trade work out as anticipated.
    I have used the entering on contra-weakness to success in purchasing options and am trying to come to grips with a prudent strategy trading the ES.
  2. Interesting question. Personally, I would lean toward alternative A. You need to be pretty good on your trend identification however and know what you're looking for in the pullback. Otherwise you're running under your own handgrenade. Some people count bars, others look for a percentage pullback, others look at TICK or an oscillator.

    The reason I would lean toward "A" is that often the return to the trend direction will be explosive, and if you wait for confirmation, you will end up with an unfavorable entry. Basically, everyone else is also watching and waiting and will jump on the obvious confirmation.

    Things are very different when you are trying to catch a reversal in intraday trend. then it is essential to wait for confirmation, otherwise you are engaging in knife catching.
  3. For what it's worth...............(1) Reduce your position size (2) Consider buying into a well-defined uptrend after it closes lower 2 consecutive days.............or...........maybe 3 consecutive days. Then expect and pray for the uptrend to resume. Do the opposite for downtrends.
  4. There are many other factors to consider. I think it particularly depends on what market you trade . Some are more trending than others I guess. I trade ER2 and wait for confirmation as I like go with the flow.
  5. cnms2


    No automatic scaling works always: neither on weakness, nor on strength. Add to your position only when your objective analysis, signals, etc. tell you to open a position in the asset you're trading, ignoring that you have (or not) already one, but applying your money management rules (position sizing).

    There are a lot of studies regarding both pyramiding and fading showing mixed results.

    This is elementary knowledge: trading is about you recognizing and adapting to the market conditions, not about forcing the market into your expectations, framework, etc..

    Good luck!