OK, I figured out why some traders may not scale in - trying to do the math on how your trades play out at 12:30am is not easy.
I'll have to come up with an Excel sheet or something on how to run this.
Example:
- Short this AM with average price of 50.50 on the ES (short 3 levels as illustrated above)
- 1/3 of the contracts are taken out at 48.00 & reversed long here as well
- the other 2/3 to reverse long do not fill
- the new 1/3 at 48.00 stops out at 46.00
- meanwhile still have 2/3 short from 50.50
- initiate new short of 1/3 at 45.50
- cover and go long 1/3 at 45.50, 1/3 at 45.75, 1/3 at 46.00
- cover and short 1/3 at 45.00
- cover and go long 1/3 at 47.00
- meanwhile still long 2/3 with average at 45.75
Anyways... you see where this is going all day.
Wed was a great example for me to look at this as a good handful of my losing trades would have never filled at 3 levels. Quite a few only filled 1/3. What I am seeing is:
1) Winners guaranteed to fill completely.
2) Losers may only fill partially.
This accomplishes a few things:
1) Commissions are lowered
2) You may take some 'shake out' trades, but not on the full load. It's kind of like testing the water before diving in.
3) Winners can actually net quite abit more b/c the shake out trade only took out a portion of your contracts. So in my short example this AM, I was short at 50.50 with a full load. Had I exited fully on my next setup at 48.00, that's +2.5. Not bad. The catch is that at that entry where I covered my short, I also went long, which stopped out for -2.00. Now if I was fully out on my short (which I was) at +2.75 (not scaling in) and then getting fully stopped on the next trade for -2.00 your net is easily calculated at +.75 before 6 full round turns. See how the numbers can really change?
Off to bed here but for our math whizzes on the board, any help on how to easily calculate this would be great and much appreciated.