Jonbig04's Log

[jonbig04 10]

Opinions Needed!

 

So here's the deal. I'm going to start scaling. I know, I've talked so much smack about scaling here and elsewhere, BUT I have good reasons. Also, it's my opinion that scaling, all in/out, trailing etc are all just the fine tuning of a strategy. I don't think they make or break a good strategy, but that's my opinion.

 

First off, in my opinion and in my trading, all in/out has been more profitable. That's why I've done it for so long. Obviously, it's tough psychologically to see those big winners come back to BE and to have an equity curve that looks like the results of a polygraph test, but to me that was appealing. I wanted to prove to myself that I had the mental fortitude and discipline to follow a plan that I knew was more profitable, no matter how much it hurt. I feel like I have done that.

 

Now that I'm starting to increase size I realize that peace of mind is worth something, and if I have to sacrifice SOME profit for it, then that's ok. Let's face it, when your goal is 20ES a month and you see a +11 go to BE, it's no fun. But I am hoping that my scaling will be just as, if not more profitable than my all in/out. Here's how:

 

I'm not sure if I'm going to be scaling out in 1/3rds or 1/4ths or what yet, but just for explanations sake, let's call it thirds. What I do now is basically move my stop to BE after +5 or so (when ever price reaches an intraday s/r level that may cause it to come back on me) and hold on for a 9-12ES target.

 

What happens is that I move to BE, get taken out BE (where as if I kept my initial stop, the trade would have survived) before price proceeds to my target. Seems to happen all the damn time actually. So I've decided that if I'm going to move to BE, I'm going to have to take some profit off at the same time. There's just no way that BE will ever pay for itself when it's costing me a full target, especially a 1:7 R/R target, unless I book some profit when I move the stop.

 

I will take a 1/3rd or 1/4th or whatever off around +4 to +6 depending on the intraday S/R, and move my stop to BE (or close to BE) on the rest. That will give me around 1:3 R/R on that scale. The next scaling area will be my original target around 9-10ES, or around 1:6 R/R. Then I will have another new target around +15ES or so, a real runner. Depending on the trade (whether I'm with the anchor trend etc) this runner could be really far off, maybe even around 20ES. Once again, it will depend on the charts.

 

With that plan I'm really hoping to net more than all in/out. I could backtest, but I HATE backtesting and the results never seem to mean squat for me anyway.

 

Anyway, tell me what you think.

[nikke 10]

Hi,

 

Given the original stop is protected by PA, and possibly by some important level.

Wouldnt you be better off in the long run taking the profit on the 1/3 and leaving original stop and targets in place?

 

Regardless if the stop is moved or not, i guess with scaling win-% goes up and average RR down. Overall maybe a little reduced expectancy. But maybe give a smoother equity curve and allow for bigger bets and maybe calmer trading:)

Edited February 21, 2010 by nikke

[DugDug 10]

thoughts - I am having the same process I am running through myself. I have to differentiate between scalling in and scaling out.

 

Conclusion - same as you - there is no right or wrong answer but a series of trade offs between monetary PandL and mental ability not to deviate from the strategy - If you find that you make less money scaling in and out, but its mentally easier, then go with that.

 

The biggest issue I am personally finding mentally challenging is reentry after scaling out.

eg; sell 3, TakeProfit on 1, TP on 1, = net short 1, then sell 3 more as a new short, TP on 1, TP on 1 = net short 2.

 

I say this as I keep asking myself, why am I taking profits, when I am willing to short again? It might feel good, but also can cause me stuff up what I am trying to achieve. (again a trade off)

As someone pointed out to me - if you like the trade and its going your way, trade more, dont take the profits off. (this is tough to do, its possibly not really suitable to day trading in which you should take profits as you are looking for lots of small opportunities.)

Edited February 21, 2010 by DugDug

[jonbig04 10]

Gah! Short taken out for -0.75

[atto 20]

Given the original stop is protected by PA, and possibly by some important level.

Wouldnt you be better off in the long run taking the profit on the 1/3 and leaving original stop and targets in place?

This. If you're at the place where you couldn't bear to have price retrace back to your entry, you need to pull some out, AND there's no logical place to move your stop up to, then might as well pull some out to make it a profitable trade, and then leave your original stop.

 

A couple additions. First, realize that in this situation, you're taking away from a winning trade (where the s/r seemed to work in your favor), while still keeping a full size on your losing trades (when it stops you out immediately). Second, usually, by the time it gets painful enough to let it retrace back at you, there's usually a spot you can move the stop to further up (such as outside a new swing). This gives you a profitable trade, and leaves everything in.

 

That specifically assumes you're taking cars off at a set tick target. Consider making your scaleouts in logical places (a smaller range extreme, potential climax, trendline break, etc). At least then, there's a price action reason to exit, verses just taking some out because it's +4-6.

[jonbig04 10]

Hi,

 

Given the original stop is protected by PA, and possibly by some important level.

Wouldnt you be better off in the long run taking the profit on the 1/3 and leaving original stop and targets in place?

 

Regardless if the stop is moved or not, i guess with scaling win-% goes up and average RR down. Overall maybe a little reduced expectancy. But maybe give a smoother equity curve and allow for bigger bets and maybe calmer trading:)

 

Yea I can see how you could make that argument. I'm not sure if you could conclusively say I would be better off in the long run, it's tough to tell.

 

thoughts - I am having the same process I am running through myself. I have to differentiate between scalling in and scaling out.

 

Conclusion - same as you - there is no right or wrong answer but a series of trade offs between monetary PandL and mental ability not to deviate from the strategy - If you find that you make less money scaling in and out, but its mentally easier, then go with that.

 

The biggest issue I am personally finding mentally challenging is reentry after scaling out.

eg; sell 3, TakeProfit on 1, TP on 1, = net short 1, then sell 3 more as a new short, TP on 1, TP on 1 = net short 2.

 

I say this as I keep asking myself, why am I taking profits, when I am willing to short again? It might feel good, but also can cause me stuff up what I am trying to achieve. (again a trade off)

As someone pointed out to me - if you like the trade and its going your way, trade more, dont take the profits off. (this is tough to do, its possibly not really suitable to day trading in which you should take profits as you are looking for lots of small opportunities.)

 

 

Scaling in make a lot of sense to me, it's just not something I want to tackle in my trading just yet. One of my main reasons for allin/out was that I could focus on the trade itself and leave the management for another day. Like I mentioned before, IMO whether you scale in or out or not shouldn't make or break you're trading, but more of a fine tuning kinda thing.

 

This. If you're at the place where you couldn't bear to have price retrace back to your entry, you need to pull some out, AND there's no logical place to move your stop up to, then might as well pull some out to make it a profitable trade, and then leave your original stop.

 

A couple additions. First, realize that in this situation, you're taking away from a winning trade (where the s/r seemed to work in your favor), while still keeping a full size on your losing trades (when it stops you out immediately). Second, usually, by the time it gets painful enough to let it retrace back at you, there's usually a spot you can move the stop to further up (such as outside a new swing). This gives you a profitable trade, and leaves everything in.

 

That specifically assumes you're taking cars off at a set tick target. Consider making your scaleouts in logical places (a smaller range extreme, potential climax, trendline break, etc). At least then, there's a price action reason to exit, verses just taking some out because it's +4-6.

 

That's of course the worst thing about scaling, your stops are still full size. But then you have to take into account all the times you could have scaled and didn't. I think that usually not scaling is more profitable, all things being equal, but I don't think it's a massive difference. However, in this case all things wouldn't be equal. Even though I'm taking profit where I usually wouldn't, I'm also letting the same amount run where I usually wouldn't. That alone should take care of the expectancy.

 

Instead of being all out at +10, it will ideally be something like +5, +10, +15-which of course averages out the same as the +10 all out, only with a smoother curve and less pain and suffering between haha.

 

About the arbitrary number, like I said, they will be based on intraday s/r, or better s/r if I can get it. For example, the first scale would be at the nearest swing from me, the next scale would probably be a major R point (as that place will be the same as my all out target is now) the next place will be some other swing point I can find. I just used the number for explanations sake. Like that last trade I was in I moved my stop to .75 above the entry, which to me is BE. If I can risk only a few ticks and stay above a swing, why not do it? So the numbers all all approximates.

 

The other thing is that I very rarely take a full stop. It's almost always BE. This month (which is shaping up to be one of my worst months ever ha) I've only had 1 full stop and it was to the tick.

[MidKnight 12]

This subject can be debated forever and its going to be a different answer for different trading methods. The only way to really know which is better and how it is best to manage is to test it out on your past trade data. In every auto system (a couple dozen systems) I have ever tested out, scaling out definitely smooths the curve and lowers RoR. In my discretionary trading, this is no different. Do the work, then you will know for certain.

 

With kind regards,

MK

[jonbig04 10]

Click for full size - Uploaded with plasq's Skitch

 

Bah, shoulda kept my mouth shut. -1.25. This month sucks.

[jonbig04 10]

Worst month ever, finishing at -6.5ES. The bulk of that came from that crude breakdown that I kept screwing up and shoulda taken sim until I knew what I was doing. Stupid decision.

 

I've already gone through the whole "I'm a piece of crap trader. I know nothing. I'm a failure" stage, and have moved on to the more productive "what can I do better" stage. I'll post about that later on in the week.

[jonbig04 10]

Speaking of crude, I have learned my lesson and will be sim trading it until I get a feel for it. Currently in a sim short.

 

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[jonbig04 10]

Crude is a beast. I love it and hate it at the same time. Anyway I got knocked out BE on that last short. This AM I took a full stop on a long for -14ticks. But then the breakout setup happened again. Hmmm it would be great to take it live I thought. But I maintained discipline and took the trade in sim. The breakout happened nicely and I was able to get a pretty good exit for +105. Figures.

 

I used a stop market order though and I'm wondering how realistic my fill was. I know experience that 10 ticks slippage is possible, so it does make me wonder.

 

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[Dinerotrader 10]

Crude is a beast. I love it and hate it at the same time.

 

The more time I spend with crude the harder it is for me to trade other futures. That breakdown gave a number of big indications it was going to occur...volume, S/R, trendline break, "123". I unfortunately, quit my SIM trading for the day before it occured so I couldn't take it. Nice trade Jon.

[jonbig04 10]

The more time I spend with crude the harder it is for me to trade other futures. That breakdown gave a number of big indications it was going to occur...volume, S/R, trendline break, "123". I unfortunately, quit my SIM trading for the day before it occured so I couldn't take it. Nice trade Jon.

 

Haha I feel you. Trading crude and then going back to ES is like switching from a Michael Bay movie to a Jane Austin novel.

 

Thanks.

[jonbig04 10]

Had some fun in crude today haha. Took a short that I really shouldn't have. R/R wasn't there. Think it was -13 ticks. Then I caught the fake breakout to the upside, out BE on that one.

 

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Looking for a long on ES around 1112.75

[jonbig04 10]

I'm really starting to dig CL. Mainly because I feel like my biggest weakness is low number of times I can take my setups. CL can cure that lol. I'm not focusing on 6E so much because I'm so anxious to get a foot hold on CL. I'm thinking my setups happen 2 or 3 times as often on CL as ES. It's great! But I want to make sure I get used to it before I jump in for real.

 

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The first is a long from last night. I had the order placed, but decided to cancel it because the swing was only 10 ticks. During the day I want to play swings that are larger when entering to avoid getting whipped around. But I took a note on the chart because I think during those hours, with the volatility less, I can take swings that are a little smaller. That suspicion is reinforced now, and I likely won't miss one like this again. This trade is the first green box on the chart above. Here's a zoomed in view.

 

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It's not a coulda-shoulda-woulda because at the time I wasn't taking swings that small no matter what time of day. I was following my rules.

 

The second green box represents where I was trying to get long, but we never have a significant enough pull back swing for me to trade. Bugs me too b/c we had a massive vol spike and I really wanted in. I wanted to see it pull back to at least 80.60. Oh well though. Still a nice flip though.

 

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[jonbig04 10]

Quick note:

 

I a now adding double top/bottom w/ hump retests to my plan. I used to trade them all the time, but took them out so I could focus on the other setups. This has happened 2 times on es in the last month or so. Both times I didn't take them for no other reason than the fact that they weren't a part of my current plan. They are too easy and reliable not to take advantage of. Today I even had the short in, but canceled it because technically it would be a lapse in discipline if I did something that wasn't in the plan. That's a psychological Rubicon that I don't want to cross.

 

This setup doesn't happen a lot, so this isn't a big change. I'm sure every dang trader caught this except for me. But no more!

 

Click for full size - Uploaded with plasq's Skitch

[DugDug 10]

Jon - double tops and bottoms - I wrote in my notes some while back that I thought double tops and bottoms were just a hindsighted version of an ABC (or 123). Its only on looking back do you realise they actually formed a double top or bottom.

Do you think there are any particular characteristics that separate a DT or DB from an ABC that makes them more or less tradeable?

[thalestrader 14]

Jon - double tops and bottoms - I wrote in my notes some while back that I thought double tops and bottoms were just a hindsighted version of an ABC (or 123). Its only on looking back do you realise they actually formed a double top or bottom.

Do you think there are any particular characteristics that separate a DT or DB from an ABC that makes them more or less tradeable?

 

I think, though I may be wrong, that Jon enters on the re-test rather than the break. In other words, rather than trading the break of the "2" point, he waits for the break to occur, and then he enters on a limit order placed near the break point, looking to sell on the re-test. If so, then that makes it very easy to see these opportunities. I sometimes enter the same way if I missed the break up or break down.

 

Best Wishes,

 

Thales

[Dinerotrader 10]

Quick question Jon,

Why do you use this weird picture upload thing instead of the forum upload?

[jonbig04 10]

Jon - double tops and bottoms - I wrote in my notes some while back that I thought double tops and bottoms were just a hindsighted version of an ABC (or 123). Its only on looking back do you realise they actually formed a double top or bottom.

Do you think there are any particular characteristics that separate a DT or DB from an ABC that makes them more or less tradeable?

 

 

They pretty much are the same kinda thing, only that in the case of a double top you aren't looking for a LH because the peaks are equal. But same concept really. Double tops as I see them don't happen very often, but I'm picky when defining them.

[jonbig04 10]

I think, though I may be wrong, that Jon enters on the re-test rather than the break. In other words, rather than trading the break of the "2" point, he waits for the break to occur, and then he enters on a limit order placed near the break point, looking to sell on the re-test. If so, then that makes it very easy to see these opportunities. I sometimes enter the same way if I missed the break up or break down.

 

Best Wishes,

 

Thales

 

For the double top/bottoms that's correct, I wait and enter on the retest of the "hump". For my other trades though I try to get in on the breakdown like you do, but sometimes I miss fill and have to wait for the retest haha.

 

Side not, I actually started using that method of entry for breakouts. Basically (assuming downside BO) I switch to the 5 sec and wait for the first sure of volume (low), then watch as price slowly ticks back upwards. If it's just a probe I'm thinking that price will never come back to that low. If it does come back I'm thinking it will probably break out. I enter just before it gets there and, hopefully, breaks out. If you recall I botched that CL breakout last month. I think I'm starting to get a handle on it now though.

 

Quick note:

 

I a now adding double top/bottom w/ hump retests to my plan. I used to trade them all the time, but took them out so I could focus on the other setups. This has happened 2 times on es in the last month or so. Both times I didn't take them for no other reason than the fact that they weren't a part of my current plan. They are too easy and reliable not to take advantage of. Today I even had the short in, but canceled it because technically it would be a lapse in discipline if I did something that wasn't in the plan. That's a psychological Rubicon that I don't want to cross.

 

This setup doesn't happen a lot, so this isn't a big change. I'm sure every dang trader caught this except for me. But no more!

 

Click for full size - Uploaded with plasq's Skitch

[jonbig04 10]

Quick question Jon,

Why do you use this weird picture upload thing instead of the forum upload?

 

I use skitch for annotating the charts (it's free) and all I have to do is click "copy to forum" and then paste it right into the body. It's just a lot faster.

[jonbig04 10]

No trades today, but I was up late last night with ES and I made some decisions I was proud of.

 

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As you can see, technically it was within my rules to enter a short there. I didn't because the swing was too small. I learned my lesson from last month and really wanted to see a nice bounce from deeper into the support zone below. Then if THAT broke down I could enter. I got the bounce, but price never came back to break that S and continued upwards. I saved myself a stop. No big deal but I'm happy that I was able to draw some decent conclusions from price and not repeat last month's mistake.

 

I wanted to get in a long on the flip test of 1125.75, but price never pulled back for me

 

Looks like there is a short sequence at EOD. I feel kind of weird because I maybe entering this short right when the market opens on Sunday night. But I guess price is price right?

 

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[jonbig04 10]

And I'm sick of ES and it's lack of volatility and my lack of trades! Grrrr. CL here I come...

[jonbig04 10]

We reached a major level on the S&P today, even on the daily chart.

 

I'm keeping on eye out for what could be a monster breakout above 1148 (1150 cash index).

 

I bought the HOD and got out for -0.75 when it became clear the BO wasn't happening. I then was able to get a short in and reach PT 1. The rest were stopped out BE when price came back up to retest.

 

I would like to get long down here, but there's been too much chop and my levels are unclear.

 

Once again though, I really think that a BO above 1148 could be monstrous.