I am showing the same chart where you have placed the arrows up or down and the question mark. I am highlighting that in the yellow circle on the chart below. Of course, we now know it went down, and I kept whittling away at 20 contracts a lick until I got out with a profit on all positions. But what would I have done had it continued up? I would have continued whittling down coupled with maybe adding two more techniques. 1) Increase my "whittling down" size to 30 or 40 contracts at a shot 2) Employ FOT (frequency of trades). Meaning I would have made MORE whittling down trades and at bigger size until if I had to flatten (the initial entry and the averaged down entry located way down on the chart) by the end of the session and take the loss on those two trades then the damage done would be offset by the larger whittling down size and the more frequency of whittling down trades during the session until the close. I might would end up losing 100's of points on those two trades but my overall profit would have likely grown considerably above the 1836.25 points. In addition it is MORE likely that the way the market probes back and forth, shallow and deep probes, that the odds are it would go back down some towards those two trades and I could exit with a smaller loss on those two and while waiting for that to happen increase my overall profit by 100's more points because of employing larger size and FOT on my subsequent whittling down trades. Why would I do this? Look at the horizontal green line on the chart. That is the high of the session. The area in the yellow circle was still quite a distance from the high of the day. It could make a higher high of the day before the session ended but the odds would be against it to do so. And look at the general trend from the open (orange line) DOWN. Both of those things taken together indicate a larger context still good for whittling down from that yellow circle area as it moved up above the circle.
You were down over 3000 points at one point in the video, what would you have done if it kept going up?
On a long enough timeframe - any strategy which frequently averages down or have an inverse risk/reward ratio (where you take massive relative risk to bank miniscule gains) blows up. The problem is it can work for a long time as these strategies often have a high win rate, but that massive hit will one day come. Here's from a guy I see on Twitter from time to time.
Did you not read my post just above your post here? My post #2422. I explained what I would have done had it continued on up since I chose to employ whittling down. If I as scalper bet big, then I have to, at times, expect bigger drawdowns. Especially, if I employ whittling down. It is part and parcel with the game. There is no need to trade big size to do well in scalping. This is one reason I do not like showing trading big size. Many retail traders cannot trade big size even if their account would allow it because in the event of finding themselves in a large draw down the pain would likely be too much. Whittling down is a method to reduce a paper loss on some previous entries while betting that price would probe enough in a favorable direction on individual bars or probes on groups of bars to whittle down the paper loss perhaps even making a profit on the paper loss or breaking even. It is betting on profitable probes OVER time as more bars form and price oscillates working its way back to the previous losing entries. In this session I certainly did not have to go to whittling down. I could have exited the two positions (those two positions the one on bar 9:37 and the other bar 9:38) with a loss early on then doubled or tripled up long on bar 9:41 and quickly got back my loss and back in profit. What I chose to do in this session was certainly not my only option. The overall trend was down, and I just chose to use the technique of whittling down the loss that was in play from those two entries of bar (;37 and 9:38. So, once I choose to employ whittling down then I stick with it as long as I can even if I keep doing it till the end of the session. I hold no positions overnight. I am always flat 15 to 30 minutes before the close of the day session win or lose. That is just the way I scalp.
That is having no strategy and getting carried away by emotions in a negative sort of way instead of relying on reason and using techniques that are based on PA tendencies. I'm not sure folks are understanding what I am doing by whittling down even though I have explained it. I apparently have failed to explain it well enough because they seem to just see it as more averaging down and it is not that although it can look like that. As concerns blowing up one day. That can happen regardless of any strategy. Emotions are part of being human and they can influence us to the detriment of our accounts. They can also be a plus to our accounts. It all depends. Most scalping will have an inverse risk to reward initially but actual risk to reward endured on INDIVIDUAL trades can be very good sometimes 2:1 6:1 reward to risk and at times 10:1 or more. The actual reward to risk on those last two trades in the 2nd yellow circle were not great but decent. I often get great actual risk to reward on the individual trades. And at times I don't but what matters is the end result and working off a strategy. I scalp. I like maintaining high win rates and I don't like to trade with a lot of paper losses because of employing too tight of initial SLs. I am constantly adjusting SLs and PTs depending on "what" the market dynamically is doing. For myself as a discretionary trader it is important what the market does, but it is also just as important "how" the market does whatever it does. So, I develop techniques to work in my favor as the market dynamically evolves. I realize that many of the techniques I use break with traditional and standard w.v. concepts of trading. All I can say is every man has to do whatever floats their boat. Regardless of what folks think I floated my boat on 12-27 with an 1836.25-point wave. It worked.
Good Morning volpri, Nice video. The capital requirements of the last trade was trading the full contract NQ is Total Unrealized Loss Profits - $35,000 Total Contracts Used - 50 Margin Requirements for 50 contracts - $50,000 Total Requirement to Trade Scalping (Add to losing trades) is about $85,000 or to be on safe side $100,000. Max Loss per trade will be about $50,000 ( I am assuming if that Trading Range did not fail, you would have taken a loss of about $50,000) So with $50,000 risk capital per trade, a trader needs about $50,000 times 3 losses in a row $150,000 risk capital and $50,000 margin So trader needs about $200,000 to trade PA scalping High Win Rate add to losing positions. Great video and thanks for pointing this out.
Good Morning volpri, I agree with you totally. We all have to do what is best for us as individual traders. I personally like the way you trade. Good work and keep the videos coming. Thank you
For those less experience and less aggressive, one can stay with a R:R of 1:1 and a win rate of ~60-70%, don't average down, use a wider SL to take care of black swan events. For reasonable profitability, trade small and trade often. Would that work?
If you are talking about an initial R:R of 1:1 how are you going to do that with a wide SL? Give me a numerical example.
Manually get out at a small loss after a certain period not getting the profit. Actually I thought that was your comment at one time when I ask about you setting wide SL. You said most time you won't let your trade hit that.