Scaling in: martingale vs incrementally, which is best?

For those who scale into and out of swingtrades, what's your favorite strategy?

Martingale = 100, 100, 200, 400

Vs

Incremental = 100, 100, 100, 100

I'm asking because I'm testing my ETF hedge strategy, I'm long bullish SPXL/TNA plus bearish SQQQ/SPXS etc, goal is to scale into winners profitably. Thx

 

Kelly criterion determines your max risk per trade. You can scale it at a fraction of kelly.

 

Kelly criterion works with total equity, he wants to know how to scale into winners, that's not the same problem.

 

The big challenge is how to scale into and out of opposite bias ETFs to turn potentially breakeven into profitable.

Example pairs = TNA/TZA FAS/FAZ SVXY/VXX SPXS/SPXL

 

Only a serious backtest can reveal the optimal scaling strategy to use with a particular system.

 

Not if the total you scaled in is > Kelly.

 

martingale when you are a billionaire trying to make millions

 

Thanks! I'm going to test half-position stops vs scale-ins. I'm long both bullish SPXL TNA and bearish SPXS TZA etc, roughly equal capital.

Goal is to add to winners and take small stops on losers, using 2day high and lows

 

Regardless of where a trade has been, whether the position is worth additional capital is based *solely* on your expectations of direction in going forward.

If I buy a position for a dollar, and the instrument doubles to $2, what is my next, "best", move?

If I double with another (lot) purchase, and it falls to $1.50, I am flat for the position, and may trigger an exit.

If I stand pat (with a single lot) and it falls back to $1.50, I am up 50% -- what's not to love?

(Well, Volatility for one thing. )

"Scaling in" needs to be based on a *prior* plan, with an attendant forward expectation (that is subjected to review). Hit-or-Miss decisions will be mostly Miss.

 

It's true if the trader is adding to losing positions via a martingale, which is not the case here.
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