@volpri, I have a question for you: To successfully averaging down, I have to remove SL on my trades. If I kept the SL, often I got stopped out. How can I avoid that with SL?
That is hard to answer without seeing a chart with some entries and losses because of the SL being hit. I really cannot form an opinion without seeing what is happening visually. The simplistic answer is to widen the SL but that is not always the best option. 1) I need to visually "see" the context is which you are executing your entries and where you are subsequently placing your SL once the entry is made. 2) Also, are you able to go long or short or only long? 3) Context is 90% of the time more important than any individual setup with its entry and SL. 4) What TF are you using and how many trades per session are you, on average, executing. Most traders will lose because they keep too tight of a SL based on "x" amount of points. A PA SL is more conducive to averaging down and to a high win rate. A dynamic PA SL is even better than even a set hard PA SL, IMO. But there are limits. Sometimes it is better to take the loss and get it back on a subsequent trade when one's premise for taking the trade in the first place has been nullified by subsequent PA after the entry has been executed.
I day trade with my IRA account so only go long. Without a SL, days like 2-7 was a disaster. I lost a big chunk of my cum profits. Fortunately made most of it back the following few days when market behaved "normally" with a TR. Most other days when the market trades in a TR averaging down worked very well. I thought of wider stops the devil is in the details of how wide? I think I need to go back to Sim and experiment on wide SL. Anyway, thanks to your coaching, I am doing very well day trading, scalping first. I then hunt for BO using the profits from scalping to feed some inevitable losses from hunting. Net-net much better profitability. Best regards,
I trade 1 min TF and on a typical day made ~ 20 trades. I trade stocks, no margins, and since it is an IRA, long only. Once I am happy with the methodology, I will start scale up and trade in a regular account.
In that case if you are trading TRs then if it was me I would only go long in the bottom 1/4 of a TR and I would add twice ( average down) if it went against me and I would wait and look for price to go back up to the bottom of the range and exit or if there is a little momentum up into the range and i would exit on any move back up towards the middle that give me a decent scalp. This is based on the premise that 80% of the attempts of a BO out of the bottom or top of a TR failed (FBO) and price goes back into the range within 5 bars or so. It is important to do this only when the 5m chart shows 20 bars of sideways move. Anything less than 20 bars and it isn't a TR just TR behavior and that behavior could very well just be a PB from a previous trend with resumption of the previous trend. When it reaches 20 to 30 bars of sideways motion then any previous patterns (such as a trend) have likely lost their influence and price is just as likely to have a successful BO out of the top as well as out of the bottom. 50% chance a BO will be in either direction. So, I would wait for an ESTABLISHED TR behavior ON the 5m chart but entries and exits made on the 1m chart. Also, I need to have defined what I call a successful BO. Since I would only be trading long if I take a long position in the bottom 1/4 and waiting for a move back up to give me a devent scalp. But if instead there is a successful BO then I would have no choice but to exit my long BE or with a loss, wait for another long entry and double or triple up the size to get my previous loss back quickly. I would have no qualms about grabbing quickly any profit that renders me a scalp because often times price will trade down to near or just past the bottom of the TR then reverse and move up a bit then right back down again to the bottom. This can happen multiple times before any substantial move back up to the top of the TR is made so I would be scalping over and over on these small moves as price hovers near the bottom of the TR for several bars. Remember high probability trades usually means small reward and big risk. I have to give up something to get high probability and that usually means small reward and not so good risk. But many traders see it wrong they think high probability means big reward with small risks. By high probability I mean the chances are high I will get a profitable scalp on a successful trade BEFORE any SL would be hit. In other words, price will likely render me a profit before it would give me a loss. So, with high probability I must not expect big reward. But what makes up for that id FOT (frequency of trades) is greatly increased. This is so because of the tendency of multiple probes on each individual bar and maybe bigger probes on small groups of bars, say on the last 5 to 10 to 15 bars.
Here is a short video on a SIM replay showing some of the concepts I discussed above in my post #2765. Especially the idea of being cognizant of the larger context. In this case I put up a 1m chart beside a 5m chart. I saw the ESTABLISHED TR on the 5m as the larger context but made my entries, exits, SL placement on the 1m. It is important if using TR techniques that it be done in and ESTABLISHED TR as it was in the 5m chart otherwise one runs the risk of getting stopped out too much and even more likely to get whipsawed. I usually just watch only one time frames vs two time frames side by side as I trade off a laptop so don't have much real estate for two charts. I will if I need to see a quick glance at a 5m chart I can change my time frame on the 1m to 5m then go right back to 1m for trading. I can usually look at a 1m TF and just deduce out of the PA on it what the PA is doing on a 5m TF without looking at the 5m TF. It is important to see the larger context to avoid bad entries on a 1 minute chart. I do look at the larger context on the 1m chart too but using a 5m in conjunction just gives me a better sense for proper entries that would likely be a winning trade. Each time frame has its larger and more immediate context in PA but it is also good to see that larger context on a larger TF. For instance, if taking trades on a 5m I often will take a glance at PA on a 15m chart just to have in my mind the two larger and two immediate contexts on two different TFs. Maybe that makes sense? Unfortunately, this video didn't show opportunities to go long since you only take long trades but just reverse it all if going long in the bottom 1/3 to 1/4 of the TR. Disclaimer: All of these videos on this YouTube channel including this video are for entertainment and information purpose only that show how I like to scalp. Actual results can be different than real or SIM results, so I am not advising anyone to use these techniques. You may not get the same results as shown in all these videos and you can even lose all your money plus lose more.