My fear: The achilles heel is when a TR turns into a sudden BO, a mini black swan in the other direction, and ended up taking a big haircut from those wide SL because now instead of 1 contract I have >10 all stops out.
If you are just averaging down and averaging down and averaging down and averaging down, for no reason other than to attempt to avoid a loss then yes that may happen. But remember there is more than 1 option. It is good to ask: "what can I do to salvage this trade?" There are at LEAST two options listed below. As concerns BOs of a TR remember, if there is a successful BO of a TR (which this was not a TR BO) that will show up in the first leg. Most BOs of a TR have 2 legs or more. Once the first leg has shown it to be a BO then I dump my position completely. I do not wait for all those wide SLs to get hit. Then I simply reverse double or triple up and get back the loss and usually get back into profit very quickly. The other tactic is to keep the averaged down position and whittle the paper loss down with successive entries until it probes back to get that original position in profit or until I can exit with an overall profit even if my initial averaged down position never becomes a winner. Sooner or later all TRs WILL BO. So as a scalper I have to have a contingency and know my options and what I will do. I maintain a wide SL in scalping BECAUSE of probing. The trade needs room to work, however, that does not mean I will take that big of a loss. IF MY PREMISE IS INVALIDATED BY PA I will either just take the loss and double up in the right direction or use whittling down. Watch the videos and study them and my writeups to understand. Look at today's chart below. Notice the opening move up. Then it starts down. I am long on bar 8:49 then I average down (but not double down) by adding another contract so now I am 2cs. I couldn't get out on bar 8:51 with a profit as it was a bear bar and below EMA. At this point I have to make a decision. Look well. I DO NOT KEEP ADDING. 1) I either decide to dump my two contracts from bars 8:49 and 8:50 and double up short (not long) on bar 8:51 with 4 contracts. If I did so, by bar 8:53 I get back my loss and back in profit, by bar 8:54 I am certainly ok and in good profit. That is one way to handle this. I DIDNT handle that way. Instead I handled it using number 2 below 2) at the time I chose to whittle down the paper loss from bars 8:49 and 8:50. I DID NOT ADD OR AVERAGE DOWN MORE. But instead I put in a LONG Stop entry order of 3cs and just walked it down a 1 tick or two above the high of the previous bar UNTIL it got executed (bar 8:59) then I immediately jumped out on the same bar 8:59. The intent was NOT averaging down. The intent was to scalp long as price probed in a favorable direction back up to my original positions (bars 8:49 and 8:50). I continued doing this for 6 more times until bar 9:14. Each time it was for a quick long scalp. I never dumped my entries of 8:49 and 8:50 until they were in profit. Important: notice after bar 8:50 until bar 8:58 I NEVER averaged down. I just swapped techniques and went to whittling. I do not consider any of those trades from bar 8:59 to bar 9:14 as averaging down. They are new long trades whittling down the paper loss of bars 8:49 and 8:50. IF I had kept adding long on all those bear bars down to bar 8:58 then that would be averaging down but I switched tactics. Watch the videos. It is all in there and in this case just a good screen shot with explanations. No video for today. BTW it was not a TR on those entries of bar 8:49 and 8:50. Those two entries had nothing to do with TR. They were entered in on a pullback from the bullish move from the open to bar 8:45. The expectation was a continuation of the bullish opening move. That didn't happen after I entered on bar 8:49 and 8:50. From the 8:30 opening bar until bar 8:45 only 6 bear bars and the rest are bullish. So, I went long on that PB after bar 8:45. That didn't work so I adjusted, kept the two positions and began to use the whittling down technique. in the end EVERY single trade was a profit! NO losses. High win rate.
I gotta quit posting guys. I was gonna take a break. Just study my videos and read my posts over next few days. Clarity will come. Tomm I go to doctor. Tuesday a cat scan. I just did an MRI. I am going to go watch Castle on TV with my wife and eat popcorn. Have a good evening.
Thank you again. This is very helpful because by coincidence I traded the same chart (ETF instead of future), around similar timeline. Your thought process/reasonings and mine are similar but also different. That give me lots of food for thought. Have a well deserved rest sir.
Good Morning Volpri, You deserve a break. I wish a happy and safe doctor visit an a no-issues-found cat scan. Take care buddy. Thank you for ALL your help and expertise.
After playing with averaging down and scaling in, I am going to stay with just simple scalping with one entry/exit at a time. Less drama, less stress, yes less profitable but happier, more relax me.
You will have to be really good at entries and accept less profits and a lower win rate. Three things that have not worked too well and consistent enough for myself. The losses will come. Especially if scalping with tight SLs. I found in my world of scalping I had to develop techniques to mitigate a position that turns against me and turn it back into a winner. But it does take a lot of practice even then. But we have to be happy and relaxed. And maybe you can just pull it off. If so, teach me! WE ALL CREATE OUR OWN REALITY. THAT GOES FOR TRADING TOO.
This morning I had other things to do but I did take a few trades. 1) 111.75 points in MNQ 2) 65 points in NQ 3) 27 points in MES 2m and 3m charts. I did not trade ES today.