Jun 272012
 

Yesterday I lost my discipline.  I refused to admit I was wrong and decided to “give it more room”.  A recipe for disaster.  5 losing days in a row and I’m losing confidence.  My levels worked well, it was just that I invented trades.

 

I’ve been debating about something for a while now and that something is scaling.  I know many trades make great use of scaling, but I think it’s a very complicated and difficult thing to master.  And right now I think it’s holding me back.  Here’s why:  On the double top at 1314 I got short with 2 lots.  Looking at the bare-bones chart here, the obvious target is the blue support level around 4.25.  So what did I do?  I took a 2 pt scale when price was holding up around 1312.  So when price got to my target I only had 1 contract.  In my view this is severely cutting that winner short.

I’ve written about scaling in the past so I don’t want to go into all that again, but to summarize:  I think the first scale should be profitable on its own, if it’s not then it’s hurting expectancy.  Sometimes people are willing to sacrifice expectancy to have a smoother equity curve or psychological comfort.  I feel like I don’t have enough expectancy to give up some of it.

So in light of my current losing streak, I’m going back to 1 lot.  I will use max 2 pt stop and I’ll go for 4 pts minimum.  And I’ll avoid scratching (another seriously bad habit of mine) and I’ll see how that works out.  In order to do this I must not invent trades.  I must trade at my levels and only trade when the next level is farther than 4 pts away.

I’m not going to worry too much about my P/L or stopping out.  I’m going to let the trades play out and see if this will work.

 

 

  9 Responses to “Review of Tuesday 06/26/2012 & Scaling in/out”

  1. unfortunately loosing is just as much part of this game. hang in there and stick to your plan! happy trading.

  2. You shorted 14 and held all the way to 04 and you call it cutting a winner short?? To me it seems like a great trade…

  3. Philip – you’re definitely write. One of my goals is to be more accepting of losses WHEN I traded by my plan. When I deviate from my plan then I won’t be so accepting.

    ValYouW – The issue is I cut half that trade short. Had I not taken a 2 pt scale (actually it was +1.75) then I would have made twice as much. So yes, I call that cutting it short.

  4. Lets say it would have found support at 1310 and rotated higher for 17, then how would you call this scale at 1312?

  5. I’d call the trade a loss. My idea was for it to go to 4 and it didn’t.

    Do you think one can be profitable taking only +2 pts on each trade? I do not because with a 2 pt stop, the win rate has to be greater than 50% and that’s hard to do. So my logic is that if this first scale is not profitable on its own, then it’s hurting me.

    I find trades that work go 4+ pts. Trades that don’t work should stop out -2 pts. so taking a +2 scale will either cut the winner short or avoid a small loss.

  6. I know a trader who makes a living scaling the first at +1 point with stop loss at 6 ticks (know him personally not on twitter or anything).
    The thing is he has patience waiting for his levels only, hence high win rate and doesn’t need those big winners to compensate on the impulsive traded which are usually a loss (my case).
    Also check FTs tweet from yday, it was something about how trading is all about small profits.
    So yes, I believe one can be profitable scaling at 2 points, but it requires discipline.

  7. I guess I should clarify: I’m not saying no one can be profitable with small scales, I’m saying that I don’t think I can be profitable with small scales.

    +1 target and -1.5 stop.. that requires 66% win rate. I’m unable to do that.

    I know FT & Rob can take very small scales, but they’re really good at timing entries and their risk is very low. I’m not so good at that so I have to use a bigger stop, like 2pts.

  8. Eventually everyone and its own psychology.. .
    All I’m saying is that the fact that you held the 2nd lot for its target is the important thing, and if scaling at 2 points helped you achieving this so its a good scale.
    Say you risked 2*2=4 points on the trade, you got more than twice in reward, I think it wad a good one.

  9. “+1 target and -1.5 stop.. that requires 66% win rate. I’m unable to do that.”
    “Do you think one can be profitable taking only +2 pts on each trade? I do not because with a 2 pt stop, the win rate has to be greater than 50% and that’s hard to do” etc etc

    …have you kept the stats on MFE/MAE? You’d be surprised at the difference between what we think works and what actually does work based on historical evidence.

    It may be possible that your entries are good enough to hold your stops for a 1:1 at a WR that makes it all worthwhile and with less stress.

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