No harm in pyramiding usually if you think you can get a good price...I often close down losing trades before their stop incrementally too, if I think the premise for the original trade is weaker (but not disqualified!). Main rule though, NEVER add to a losing position...
alan5616
Established member
- Messages
- 927
- Likes
- 198
Scaling out of positions is a popular strategy used by retail and pro traders alike. One pro that I know, structures his trades in triples. For example, he might buy 30 contracts/lots and set certain targets. As the first target is reached, he will dispose of 10 lots, when target 2 is reached, he will dispose of another 10 lots. He let's the remaining lots run as far as he can.
This is not a strategy I employ as I prefer to trail my stop but, I agree with his basic philosophy. In fact, I have his words written on a Post-it, stuck to on my PC. His magic words? "It's a trading crime to allow a winning trade to turn into a loser". Scaling out is a pro's way of locking in profits and controlling risk management.
meanreversion
Senior member
- Messages
- 3,398
- Likes
- 538
It's about finding the right system for you. I agree with not allowing a winner to become a loser; statistically it might not make much of a difference, but psychologically it can be damaging, and that needs to be avoided.
Here's an example (I've rounded the numbers slightly).. I was short EUR/USD with stop of 50 pips and t/p of 150 pips. The low in spot was 145 pips below where I got in, and it has now rallied 80 pips off the low. I've moved my trailing stop to +50 pips (this will probably get triggered soon).
I'm guaranteed a 50 pip profit here, but it's annoying that I came within 5 pips of making 150. But the move happened during the evening when I was out and I don't want to have to check the market all the time. So, sh*t happens. There have been other occasions when I've gotten lucky, this isn't one of them.
Someone scaling out would probably have sold one unit at +50, another unit at +100 and probably trail stopped the final unit at +100, which on this occasion would certainly have been the better approach.
Here's an example (I've rounded the numbers slightly).. I was short EUR/USD with stop of 50 pips and t/p of 150 pips. The low in spot was 145 pips below where I got in, and it has now rallied 80 pips off the low. I've moved my trailing stop to +50 pips (this will probably get triggered soon).
I'm guaranteed a 50 pip profit here, but it's annoying that I came within 5 pips of making 150. But the move happened during the evening when I was out and I don't want to have to check the market all the time. So, sh*t happens. There have been other occasions when I've gotten lucky, this isn't one of them.
Someone scaling out would probably have sold one unit at +50, another unit at +100 and probably trail stopped the final unit at +100, which on this occasion would certainly have been the better approach.
meanreversion
Senior member
- Messages
- 3,398
- Likes
- 538
Interesting. I use ATR which incorporates volatility along these lines. I don't think I'd place a stop as far away as that.. I prefer to trade off 4hr charts which keeps P/L volatility down.
DAVie all these calculation mean squat; place a stop order where your idea of where the pair was going is wrong thats it.Infact the GBP/USD tonight went from 1.60 to 1.625 no amount of calculation can predict what a pair can do.
Im long on GBP/USD since 1.604
Im long on GBP/USD since 1.604
