Position Management Strategies

[al_sellatmarket]

	Quote:	sds
	Thanks TinGul, If the position moves against you, do you exit out of it at once? Cut the loses down and let the winners run. This is okay. But have you or anybody tried applying staggerred stop losses? sds.

Staggered... hm, a new word for me (I'm not native English speaker). I called it ladder stop. Did I get you right and this is what you call staggered (see image below)?



Trailing stop?

[keymoo]

I think an exit strategy for the last part of your position based on technicals is better than a limited fixed target. Why take only 10 points when the market is offering 100? I get out half my position at +5, quarter at +10 and the last quarter is left to run and I have 3 or 4 exit criteria to look for.

[lrushing]

One of the most important and overlooked aspects of position management is whether or not the initial trade taken was a low odds, medium, odds or high odds trade.

No matter what style you trade and position management techniques you use, if its a low odds trade, you will lose more money in the long run. Medium odds trades can either make or break your trading profitability. And high odds trades are usually the trades that are the emotionally scariest to take. However, if entered properly will provide the easiest and most rewarding profits.

Scaling-in has pros and cons and so does scaling-out. One of the overwhelming advantages of scaling-in is that if you have a low batting average with picking winners then this technique will help build your stamina and improve your entries. Similarly for scaling-out, if you take a lot of big loses, then learning to take some profits off the table helps more traders psychologically build their confidence and reduce P&L draw downs and pullbacks.

Remember, your high odds trade set-ups are in congruency with the overall market trend, hence you can scale-in and scale-out, or most any position management techniques and still look forward to great performance of those trades.

[weiwei]

Leroy, I agree with you on that. and whether to scale in or out, it depends on your style. For a trend catch trader, then scale in would be a better method.

But if one is to catch market inbalance on supply and demend, (what most intraday trader try to do) then scale out method would be good to collect points.

Basically, for intraday trader this rule works better: Do not let your winner turn into a loser.

For swing trader or position trader: then this is a better rule: Let your profit run.




weiwei

[sds]

	Quote:	al_sellatmarket
	Staggered... hm, a new word for me (I'm not native English speaker). I called it ladder stop. Did I get you right and this is what you call staggered (see image below)? Trailing stop?

Hi al_sellatmarket,

Yes, you got it right.

The idea behind this is to avoid a loss when market takes the obvious stops out before making the move.

Instead of applying a particular price as a initial stop loss, have a zone.

generally useful for position traders.

sds.

[sds]

	Quote:	lrushing
	No matter what style you trade and position management techniques you use, if its a low odds trade, you will lose more money in the long run. Medium odds trades can either make or break your trading profitability. And high odds trades are usually the trades that are the emotionally scariest to take. However, if entered properly will provide the easiest and most rewarding profits.

Hello lrushing,

Could you explain me what exactly you mean by Low, Medium, High odd trades?

sds.

[maildigger]

	Quote:	weiwei
	Leroy, I agree with you on that. and whether to scale in or out, it depends on your style. For a trend catch trader, then scale in would be a better method. But if one is to catch market inbalance on supply and demend, (what most intraday trader try to do) then scale out method would be good to collect points. Basically, for intraday trader this rule works better: Do not let your winner turn into a loser. For swing trader or position trader: then this is a better rule: Let your profit run. weiwei

I have troubles with understanding the advantage of scaling out. Let's say:

I trade 3 contracts. My risk is x ticks, my target is 2 x ticks.
total risk = -3x
total reward = 6x

I trade 3 contracts. Risk = x, 1st target = x, 2nd =1.5x, 3th 2x
total risk = 3x
total reward = 4.5x

Is the advantage of the partial profits greater than the smaller risk/reward ratio in the long run?

[lrushing]

SDS,

There are numerous definitions and examples of "high odds" and "low odds" trades. But here is an example of each.

Assume at a high level the overall market is bullish (i.e., 60 min/daily charts on E-mini futures) and somewhat congruent. And you trade one of these markets, like the YM. If you are scalp trading and get a short trade signal on lower time frames (2/5/15/30 charts) then you are counter trend trading and going against the macro market conditions. Even though this trade setup might be a great setup, in relationship to getting a long trade signal on that same time frame, this short trade signal has lower odds of consistently returning a high risk-to-reward. So if you conduct a series of 3, 4, 5, ... short trades going against the macro trend, How many do you think will make you consistent profits and reach your target.

An example of a low odds trade could be taking a long entry signal in a downtrend, such as buying a sideways consolidation breakout on a lower time frame and the higher time frame is in a strong downtrend. This trade might work and you reach your target, but if you take enough of these trades, you will find your batting average diminishing and your capital also.

[descartes]

Actually i disagree with the statement "Whichever way you do it I think you need a target before you enter the trade because it's difficult to be objective and rational when you're in a trade."

If you have a trading plan and believe in yourself then , you should remain "objective and rational" when in a trade.

Not trying to be rude but just pointing out that in my experience men are much more rational and objective than a woman. But thats a thought for another post :-)

With regards to targets "notouch" does actually have a point but he forgot one thing : what target will i exit at ?

You would be surprised at how many people actually pick good entry points but close the trade at the first sign of profits and end up kicking themselves beause they did not trail the position.

[torero]

I think it comes down to having already battle-tested the strategy to know which targets or no targets make money in the long run before trading it. I personally set targets but many times I try to stick and let it run its course even after it has reached targets but convince myself to stay on the trade. There are days when i do want to kick myself in the ... but those don't come often enough in ER2 stomach through breakevens and/or stop losses more than 80% of the trading days. Just my personal perception.