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Thursday, 6 March 2008

Scaling in on Trades according to Plan

To scale in or not to scale in, that is the question.
I can find good entries, but the addition of contracts to the original position is where I mess up a lot of the time. I notice I add to winners with buy/sell stops, but these adds are placed at bad places because the majority of the adds occur on price spikes. After the add to the original position has taken place on a price spike, the trade retraces and the trailing stop is hit, turning a winning trade into a breakeven to losing trade. This brings up the question, to scale in or to scale out of the trade? I say, only scale in if the trade is giving another signal. Don't scale in just because the trade is a winner and looks like its running, because many of these "runners" occur during price spikes and will likely retrace and bring your average price on the contract down to breakeven or even losing.

Here are some examples-

Good trade gone bad by adding at the wrong place-



Good trades following the plan-



My trades-

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