Trading with Market Statistics VI. Scaling In and Risk Tolerance

[BlowFish 10]

It's in the first sets of videos. It is even in the ones where he introduces standard deviation.

 

Well it's been some years since I watched the videos or read the threads (though at the time I did many times), I am pretty sure that they do not advocate using the PVP as a stop. I may be mistaken, it would not be the first time. Perhaps re-read Jerrys first few posts in this thread, again my whole understanding from them is to get away from thinking of 'stops' (apart from emergency and account sized based ones) and start thinking about risk and scaling (adding to a position) or reversing.

 

If the PvP 'jumps' due to a new high volume point forming and the skew changes a newbie should exit, is that what you mean? That is a little different to a stop. My understanding is the modal point (pvp) is a low probability place to consider these actions.

 

Edit: Are you talking about http://www.traderslaboratory.com/forums/attachments/6/2044d1185246572-trading-market-statistics-iv-standard-deviation-eslongjuly23.swf ? How far in?

Edited April 13, 2011 by BlowFish

[Sandov 10]

Well it's been some years since I watched the videos or read the threads (though at the time I did many times), I am pretty sure that they do not advocate using the PVP as a stop. I may be mistaken, it would not be the first time. Perhaps re-read Jerrys first few posts in this thread, again my whole understanding from them is to get away from thinking of 'stops' (apart from emergency and account sized based ones) and start thinking about risk and scaling (adding to a position) or reversing.

 

If the PvP 'jumps' due to a new high volume point forming and the skew changes a newbie should exit, is that what you mean? That is a little different to a stop. My understanding is the modal point (pvp) is a low probability place to consider these actions.

 

Edit: Are you talking about http://www.traderslaboratory.com/forums/attachments/6/2044d1185246572-trading-market-statistics-iv-standard-deviation-eslongjuly23.swf ? How far in?

 

 

 

at the first videos... he will recommend a initial STOP loss below/above the PVP...

[Sandov 10]

Good show on the computation dbntina and your analysis of the outcomes for various trades.

As far as risk/reward, think of it as how much does it realy hurt if it only represents 2% of your entire account vs. how much you are hurting if you take multiple stoplosses. To get stopped out in the scenario that is described, the market would have to move 3 SD without a rotation against the skew. You can avoid a chunk of that by not taking trades at the 2nd SD, expecting a move to the 3rd SD, not a high probability trade.

 

 

since probability is decreasing over deviations..... does it make sense to scale out ????? for example... starting with 3 lots at the vwap and scaling out off untill price reached the last st. dev? (talking about directional skew trades only)

[RichardCox 10]

I just finished an article on this topic here:

 

http://www.traderslaboratory.com/forums/forex/18483-fibonacci-trade-scaling.html