Adding to WINNING positions/averaging up

[porph]

Just wondering what everybody's thoughts are on this and how exactly they implement this idea.

I have been trying to add to positions that are in profit and hit an area of consolidation. I then add a limit order depending on price action and a breakout of this area.

I guess another factor is by how much you increase the position.

Your thoughts?

 

[minime69]

Just wondering what everybody's thoughts are on this and how exactly they implement this idea.

I have been trying to add to positions that are in profit and hit an area of consolidation. I then add a limit order depending on price action and a breakout of this area.

I guess another factor is by how much you increase the position.

Your thoughts?

i generaly add at the same point as you, a break of sup or res or after a break of consolidation, and i usualy add to my posy by the same size each time, i dont do more size just cos i'm on side. i would rather add to my posy 3 or 4 times as the market moves in my favour rather than in one go.

 

[tomorton]

Pyramiding like this is a great theory, I wish I could do it. I have tried it, and applied a rule that wherever my additional position is opened, this must be based on what would be a valid entry point according to TA, in the absence of the original position. So, if long a on swing trade, waiting for a 3-day correction then going long on the 'up' day after a confirmed swing low would be valid. The reasoning being that if I can't see why I would buy at that price, why would I expect anypne else to?

In practice, this is probably too cautious to be succesful. I prefer to take profits early and hope to get in at a later date. In the example above of course, pyramiding by my rule would entail seeing three 'down' days eating into my long position: I would probably close the original long on the first or second 'down' day, hoping to re-enter later iof the trend is re-established.

 

[porph]

Managed to work this quite well today on a long cable trade. Unfortunately cocked up part of it by forgetting to move my take profit on half of the trade.

Still took 147pips vs 108 if I hadn't added to it.

 

[safvan]

Averaging up makes more sense. One does not have to make 1000 trades to make a million. One can make up a lot of money just averaging up on their 5 to 6 *winning* positions hence the old concept of focusing on your winners!

 

[SpiritBeing]

This is an excellent question!

I use breakouts for entries to and i definately think scaling in and out is the way to go.

Esspeccially if you handle large volumes. When done correctly, and with the correct money management, it has the potential to make your equity curve MUCH smoother:!:

 

[Hotch]

I only make an addition if I'd enter anyway.

 

[brettus]

Just wondering what everybody's thoughts are on this and how exactly they implement this idea.

I have been trying to add to positions that are in profit and hit an area of consolidation. I then add a limit order depending on price action and a breakout of this area.

I guess another factor is by how much you increase the position.

Your thoughts?

Averaging up is great, but will just mean you will lose more often. When you hit a good run though you will clean up. If your win ratio is less than 40% already, this might bring it down to 20% or lower. It's nothing bad but can be psychologically hard for many traders. But if you hit one, it could cover over 20+ losers. I think it's a great way to trade.

 

[Chartsy]

Trader dante explains a way in his thread....i've never looked at it. I used to do it but you gotta be really,really patient, like once in 6 months.The way i used to do it was to buy a dip in a trend, scale out along the way, then on another dip add the original amount + some more...repeat.

I could still do it but i think...if you have big conviction in a setup you can leverage up and double your account in 5 ticks. I'd never do that of course! I just take swings out of trends, entry, stop and target. If i was to attempt it again i'd try to pyramid within a swing if you get me, as in uptrend, pullback to support, wait for a gnarly pin bar, add on breaks of S/R...great in theory but is hard to do, i haven't a ****ing clue whether a support will hold or break,for now....

 

[traderman1]

Averaging up makes more sense. One does not have to make 1000 trades to make a million. One can make up a lot of money just averaging up on their 5 to 6 *winning* positions hence the old concept of focusing on your winners!

I always try to average up on all my trades. It works. It is moving with the momentum.
The trick is to close out ALL trades using the SL of the last trade to be opened. That captures all that profits of the previous trades.

 

[safvan]

I always try to average up on all my trades. It works. It is moving with the momentum.

 

[montmorencyt2w]

Trader dante explains a way in his thread....i've never looked at it. I used to do it but you gotta be really,really patient, like once in 6 months.The way i used to do it was to buy a dip in a trend, scale out along the way, then on another dip add the original amount + some more...repeat.

I could still do it but i think...if you have big conviction in a setup you can leverage up and double your account in 5 ticks. I'd never do that of course! I just take swings out of trends, entry, stop and target. If i was to attempt it again i'd try to pyramid within a swing if you get me, as in uptrend, pullback to support, wait for a gnarly pin bar, add on breaks of S/R...great in theory but is hard to do, i haven't a ****ing clue whether a support will hold or break,for now....

Is this the thread?

http://www.trade2win.com/boards/planning-risk-money-management/38980-how-make-big-money.html

It's not Trader_Dante's thread (I had mis-remembered that it was), but he contributes to it. Some interesting stuff there.

His first posting in that thread:

http://www.trade2win.com/boards/pla...nt/38980-how-make-big-money-3.html#post504994

 

[Splitlink]

Is this the thread?

http://www.trade2win.com/boards/planning-risk-money-management/38980-how-make-big-money.html

It's not Trader_Dante's thread (I had mis-remembered that it was), but he contributes to it. Some interesting stuff there.

His first posting in that thread:

http://www.trade2win.com/boards/pla...nt/38980-how-make-big-money-3.html#post504994

Yes, for me adding requires a lot of time and I try for a good run and take profits.

I get the impression, with my trades, that if I don't get in at the start, it is too late to get in later. That knocks any argument for adding, in my case, on the head.

That does not mean, though, that it is a bad idea. As always, horses for courses.

 

[traderman1]

I get the impression, with my trades, that if I don't get in at the start, it is too late to get in later. That knocks any argument for adding, in my case, on the head.

That does not mean, though, that it is a bad idea. As always, horses for courses.

Its not too late if the momentum is moving your way and you have an suitably sized SL. You are letting a profitable move to keep running. (Let your profits run)

And by saying 'its too late to get in' you are telling yourself that the market has got too close to a top (you are trying to pick tops )

 

[TheBramble]

If you are presented with a trading opportunity that meets your entry criteria, you enter a trade.

If you already had a position in it, you’ve just added to it.

 

[andycon]

Just wondering what everybody's thoughts are on this and how exactly they implement this idea.

I have been trying to add to positions that are in profit and hit an area of consolidation. I then add a limit order depending on price action and a breakout of this area.

I guess another factor is by how much you increase the position.

Your thoughts?

I will add when my system gives another entry signal, I then move my stop loss and target on the original trade to that of the subsequent trade. I only do this when the second signal is at least 50 points away from the previous signal.

 

[traderman1]

I will add when my system gives another entry signal, I then move my stop loss and target on the original trade to that of the subsequent trade. I only do this when the second signal is at least 50 points away from the previous signal.

Yes, I agree with this. But the 50 pips rule is changeable depending on the the currency pair. I use 50 pips only on the audusd pair

 

[andycon]

Yes, I agree with this. But the 50 pips rule is changeable depending on the the currency pair. I use 50 pips only on the audusd pair

That is a really good point that had I hadn't thought of, whilst I don't trade some of the more volatile pairs or exotics with wide spreads, clearly the 50 point rule should not be the same for the aud/usd as say the eur/jpy. I need to look at this again, thank you.

 

[Splitlink]

Its not too late if the momentum is moving your way and you have an suitably sized SL. You are letting a profitable move to keep running. (Let your profits run)

And by saying 'its too late to get in' you are telling yourself that the market has got too close to a top (you are trying to pick tops )

Yes, but I think that that matters more for longer term trading. Rarely am I in the market after lunch.

 

[Shakone]

If you already have a profitable system and are thinking of adding to winning positions, then I think you should listen to Hotch and theBramble. An alternative is to design a system that works by adding positions to winners