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I disagree with entry 1 not occurring anymore, because you cannot have a perfect entry - and if you try, you will end up missing more signals that worked than didn't, in my opinion.
Long story short, there is no black and white answer only many shades of grey. Everyone should analyze their trades and come up with their own plan of how to improve their trading. I believe that is what Gary is doing.
Scaling into and out of trades requires real skills. Never add to a loser is absolutely correct. For me a losing trade is ONE TICK PAST my STOP.
Up to my stop it is still a valid trade to enter. I can now watch for additional signals on a smaller time frame to add more even though I'm taking heat. I prefer this to taking the full position at the initial signal. I know most entries take some heat. This is common practise amongst professional traders. Adding past the stop is averaging a loser and a certain way to blow up an account!
I do this on the back of knowing my 'e' edge ratio. Divide MFE by MAE and look for greater than 2.00 over hundreds of trades. A super good day can be 20.0 and a garbage day 0.96. A good week for me is + 3.50. Knowing what causes your e ratio to suffer keeps you disciplined.
Why not use a second strategy based only on the occasion that a position is going against you after entry.
e.g. your Standard Entry plus a draw back of five ticks...
If that strategy works out even though with a lower frequency, you have your answer, or maybe, even a better strategy, which might be worth more risk per trade, given the smaller stop and the hopefully higher expectancy.
Hi
How did you get that 8 ticks average number? Average isn't same as peak of distribution.
Do you realize that every lose will be with two contracts but not all wins. When price get down you don't have to be filled.
What was the point to get in the market when you finish first trade with loss of 1 tick ?
It looked to me that you just want move your entry lover to be sooner BE ?
Hi Gary
This is a very thoughful process, i see where you are coming from and i would consider the same if the original position was not stopped out and no material change to the original setup. then by using exact same stop a better entry to scale in definitely worth a shoot, as long as my aggregate risk is taken care of.
I have another question here in regards to MAE, hoping to have a discussion.
Would you consider, in your case, to have another strategy base on similar entry setup, but with just 9ticks stoploss. and by reducing initial stop, with same risk appetitie, you can now do approx 1.5 times bigger. which essentially i think this help overall to cut losers small and keep/upsize quality winners?
i am not a math genius but do you think this may end up with lesser trades, smaller average losers, mayb not higher average profit but absolute profit will be higher in this case?
I am looking at my MAE and MFE, been thinking how else i can improve my trades, hoping you can enlighten?
My entire strategy is predicated on a perfect entry. And although you are right and I miss fills regularly, the trades that I win are indeed winners while the impact of my losses are kept infinitesimal. This strategy tends to only make sense in an environment with extremely low cost, or nonexistent, trading fees (in my case, equities) which allows one to make multiple attempts to enter a position without incurring any commissions.