I nearly always scale into a position. I found out the benefits by mistake. CMC at times doesnt allow me to opena £20pp position on the DOW without a requote/delay.
So I reduced position size down to £3pp and found I would get instant fills. As I am a pattern trader I enter within the pattern in the direction of the overall trend.
If I opened a full £20pp position then thats it, the price ive traded at is final. However what are the chances that you enter a trade and it immeditely guns for your price target? Especially when you are day trading the DOW. The dow can be quite volatile even within a neat pattern.
So I enter £3pp at one price. It spikes higher so I think the break may be on, I add another £3pp. However its a fake break. Its shoot lower below my 1st entry, alot lower infact. The pattern looks good and its hit the bottom of the patterns trendline. I go in slightly more aggressively now. £6pp to pick up some at the bottom. Now even if the pattern fails and breaks below that line, then its a fake, but that £6pp Ive got from the bottom so it wont hurt me as bad had I got the full load at £20pp at one price.
Now im pumped up to a good size position, infact im overweight, I wait for the breakout. accuract rate is 80% for me on pattern trades at the moment. The initial break takes hold. I start scalling out on the breakout/spike. Position size goes from say £30pp down to £10pp. I caught a good many points at £20pp. Now I let the £10pp run. Ive locked in a good profit and its gonna take quite a bit of retracing for me to be at a loss. But now I can observe with more confidence and see how to play it, does the breakout look good or not? If it does let it run to the full target.
If it looks really good then go aggressive again and start adding on pullbacks.
Discovered scaling completely by accident but its excellent strategy for an active day trader to use.
Increased you risk/reward substantially and will smooth out an equity curve too.
So I reduced position size down to £3pp and found I would get instant fills. As I am a pattern trader I enter within the pattern in the direction of the overall trend.
If I opened a full £20pp position then thats it, the price ive traded at is final. However what are the chances that you enter a trade and it immeditely guns for your price target? Especially when you are day trading the DOW. The dow can be quite volatile even within a neat pattern.
So I enter £3pp at one price. It spikes higher so I think the break may be on, I add another £3pp. However its a fake break. Its shoot lower below my 1st entry, alot lower infact. The pattern looks good and its hit the bottom of the patterns trendline. I go in slightly more aggressively now. £6pp to pick up some at the bottom. Now even if the pattern fails and breaks below that line, then its a fake, but that £6pp Ive got from the bottom so it wont hurt me as bad had I got the full load at £20pp at one price.
Now im pumped up to a good size position, infact im overweight, I wait for the breakout. accuract rate is 80% for me on pattern trades at the moment. The initial break takes hold. I start scalling out on the breakout/spike. Position size goes from say £30pp down to £10pp. I caught a good many points at £20pp. Now I let the £10pp run. Ive locked in a good profit and its gonna take quite a bit of retracing for me to be at a loss. But now I can observe with more confidence and see how to play it, does the breakout look good or not? If it does let it run to the full target.
If it looks really good then go aggressive again and start adding on pullbacks.
Discovered scaling completely by accident but its excellent strategy for an active day trader to use.
Increased you risk/reward substantially and will smooth out an equity curve too.