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I have never been in Al's chat-room, but his books and videos form the basis of my trading. I am not against scaling-in, it is just that it may not be something a beginner should do and there is a considerable difference doing it in sim versus real account.
I think in some ways you answered this yourself The key in what Al says is "if your entries are reasonable". You say your entries were not ideal and open loss was scary. That's exactly the problem. It takes time and practice to know those reasonable entries are and you want to preserve your capital during this period. Also, it is no fun trading with huge open losses and being scared on every trade.
In terms of when scaling-in is feasible, I would say it is after you become an expert in reading price action. When you are trading many contracts, you can scale in during some occasions keeping your risk on par with every other trade. For example, scaling into a H2 and then a Wedge pullback in a strong Breakout or scaling in during fading a trading range extreme on a clear trading range day or using a wide stop and scaling in on a trending trading range day for a test of the first trading range. But, the important thing in this knowing when you have to exit the entire position. Until you are clear on it and can exit without a second thought, you shouldn't do it.
Everything comes down to math and expectancy at the end of day. You should do something that gives you a positive expectancy and you should also have a good time doing it. You can achieve positive expectancy in many ways. Scaling into losing positions increases probability, but unless you are good at it, it has the potential to wipe out earlier profits due to larger losses.
While Al suggests scaling in, he also advises beginners to find 2 to 3 swing trades a day. This is great advice in so many ways. First, you are not risking a lot of money, so you can trade without the knife hanging over you on every trade. By waiting and trying to identify those good setups, you develop patience and the screen time that helps you get better at reading price action. You will also get used to taking smaller losses, which is vital in the long run. While this way of trading is not as cool as scaling-in and avoiding losses, as you become better, you will find that you can generate a positive expectancy from your trades. It is general human tendency to focus on a higher win rate, but having small losses and big wins can get you the positive expectancy while also saving on commissions. I am speaking from my own experience and your mileage may vary.
I don't know, scaling or not to scale... its just there are so many good trades to take out there that i don't want to stick with a losing position for too much. The only reason to keep a trade open is if it is in the profit zone, a swing for example... i would rather add a contract in a pullback on a trend than adding a contract to a losing position. This is my point: if you can stand the minus sign in profit for a while, untill a good setup pops up to balance it, you better close losing positions and open another trade where you find it profitable. It is the same thing after all, but you are not tied with a losing position. For me as a real account trader.. its sacred not to add to losing positions. Unless i accept the possibility to lose a good amount of moneys, like what happened to me yesterday on trade 4 of CL
I have been considering to find another broker for a long time. I have been working with NT ever since the beginning. I don't like changes, but maybe it's time to go shopping!
Do you have any brokers to recommend? You can message me...
Scale in or not? I think it's purely my psychological problem. Now I think of it, it's the same in the two scenarios (but I chose the first one):
In the first scenario, e.g. I believed the price would go up to 2374.5. I bought 2371, then the price drop to 2370, I bought 2370; and I bought 2369 again, thinking I got a deal. The price went up, and my scale in position had made me extra money.
In the second scenario, I bought 2369 and price went up. Should I buy more at 2370 and 2371? The idea of having to buy higher than my original price upsets me.
Anyway, many thanks Alex @patrader65, for making me give this a serious thought!
I think that scaling in successfully requires 3 things: 1) a large account, 2) Initial position is small compared to maximum position, and 3) being confident (and experienced enough) in your read of the PA that the market is only temporarily against you.
Without #1 and #2, you can't sustain the open loss before the trade turns in your favor. Without #3, you could end up losing a lot of money if you are just flat wrong reading the PA - the bigger your account the more you will lose if you're stuck scaling in against a strong trend. Traders much bigger and more experienced than us have blown themselves out because of this, so I'd most definitely not do it as a beginner even if you have a large (real or sim) account. I'd just learn to take the initial small loss. If you truly think your read is right, reenter again where you would've scaled in (you'd BE or make a small profit w/o the risk of a large loss). Once you are not looking at an open loss you can be a little bit more objective.
Hi Lo Important Pattern
Prior Day Session 2378.25 2367 MTR, did filled gap to previous day’s low, but did not filled gap to previous close, bear in control Overnight Session 2375.5 2370 TR, all bars below EMA; limit bull and stop bear made money;small range, BO mode?
Today 2374.75 2364.5 TR, bearish
Trade #1. Sold [email protected]. Scalped 4 ticks for 1 contract and was stopped out on the second. P/L: 1*4 ticks+1*(-3 ticks)=1 tick (minus commission)
Trade #3. Sold 2@2370, bought back 2369.75. I was going to get 1 point, and it was a limit order. However, the market moved too fast and I got 1 tick slippage. P/L: 6 ticks.
Trade #4. Price again went above overnight support line(green dot line), I bought 2 contracts@2370.25., expected a MM to 2372.5 (price BO resistance 2369.75). It didn’t go as quickly as I expected, so I exited [email protected] & [email protected]. P/L: 1*5ticks+1*4ticks=9 ticks (minus commission).
*** Thanks @patrader65, for reminding me the importance of following trend.
Trade #5. Sold [email protected], bought back at 2369.25. P/L: 2*(-2 ticks)=-4 ticks.
** If I waited for a 2nd entry short, I would have avoid this loss... But luckily, I cut the loss short.
Trade #6. Bought [email protected] for it’s a 2nd entry long. Scalped 1 points of both contracts. P/L: 8 ticks (minus commission)
*** Market pulled back after my entry, but did not BO lower than my stop price 2368.5.
Daily P/L: 23 ticks (after commission)
Lessons:
1. I’m not confident today. At the open, the market went down too many points and I was not sure about my long theory. My hesitation made me lost my chance to go long near yesterday’s low. Now in a hindsight, I can see the market BO overnight support, pulled back (it was a PB because the highest point was no higher than overnight high), and BO again. This time the pullback was weaker, and after 3 hours’ TR, it finally BO and reached the measure move of overnight range.
(I don't remember the original quote, but it's like this "people trade their theory about the market, not the market itself", and I believe at least this fits me well. Having a theory before open is important to me.)
2. I over traded today. Not clear about the big direction, I changed my view of the market frequently. I went short when the market was up, and I did not realize that strong hands need more room for profit. They are not scalping, and 4 points is probably just a bigger scalp for the institutions.
Today I am testing Global Zen Trader, a white label of OEC. I'm not used to it... But anyway, I just got my daily target using only 2 contracts and scalping! Only trade 2nd entries today. Happy~~
March 10, 2017 Friday
Hi Lo Important Pattern
Prior Day Session 2369.5 2354 Big TR/ MTR Overnight Session 2379.75 2366.25 BullT, BO high of Yesterday
Today
Trading Plan: BLSHS or follow trend
Support BUY: 2369.5 (yesterday’s high) Resistance SELL: 2379.75(if today’s TR, overnight high is resistance)
Trade #1. 2nd entry long, failed BO of support. Bought for test of overnight high: [email protected], [email protected]. P/L: 2*5=10ticks (minus commission)
Trade #3. Price has come to my area of interest. 2nd entry long at support. Bought [email protected], added on another [email protected] (GZT has 1 tick’s slippage for 2 of my contracts, I used stop order, which I don’t usually do) sold 4@2370. P/L: 7+6+3+2=18 ticks.
Daily P/L: 35 ticks (after commission)
I don't know how to adjust the arrow in GZT in order to correctly label my trades... very bad illustration...