Scaling into position?

[mathisfield]

Wonder how many people "scale into" a position. This obviously works more effectively on long term such as daily charts.

For example:

I decide I want to buy $300K of EUR/USD based on EMA signal on my daily chart. On day 1 I invest 100K stby watch the price action.

If the price continues to increase I invest another 100K on Day 2 stby watch.

If price increases again I invest final 100K.

Hopefully (!!) the price continues for a few months uptrend.

This seems to be a way to protect my capital since if on Day 2 price reverses I loose XXX% of my initial 100K I get the hell out.

thoughts/comments?

anyone doing this

[enkidu007]

This method is only good if your entry signals are low percentage winners. If you're entry signals are high percentage winners (60%) or above the you would be better off to do the reverse.

[eternalfuture]

Mathisfield

I believe when you have a winning position it would be a good idea to add more lots to it provided there's a reason (TA-based/Fundamental-based ... whichever you are using) to support the re-entry. Don't forget to use the stops. They can be used to protect your 'unrealized' gains too.

In my place the required margin to enter 1 lot size is $1000. You can let your running profit to reach $1k then you re-enter. It's an alternative. You can also re-enter based on your signals. But re-entering after you get your extra cash would also a good idea.

Once you reach your target you can trail the stop. smaller risk breakeven then to larger profit.

Well that's just my thoughts.

Good luck good trade.

[James]

I do this in a strong trend. I want to be long euro for example but in a strong long trend dips can either be shallow (due to the exuberant bullish momentum) or deep (still within the overall trend)

For this reason I often scale in buying the shallow dips adding to the deeper dips (cheaper price better bargain) stops below the major support zone.

Not for everyone but provided MM is good it's safe it works it makes money

[eternalfuture]

Oh one more thing...

This add-on-profitable-trades strategy only works on a strong trend. If the market is consolidating instead of getting for a kill you will get yourself killed.

As for safety measures it will be best to utilize this in a direction which in accordance to the current trend. If you're trying to pick some fame by picking the tops/bottoms forget it. This will put you in a dangerous position. The market will squeeze you if you try to go against it.

Good luck good trade!

Cheers!