1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

Chapter 36, Part II. Scaling In. Page 3

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 28, 2013.

Thread Status:
Not open for further replies.
  1. Sive Morten

    Sive Morten Special Consultant to the FPA

    Joined:
    Aug 28, 2009
    Messages:
    11,380
    Likes Received:
    14,561
    Commander in Pips: Right. Here we accomplish first condition for scaling in:

    Overall context holds when you make scaling

    I offer you to apply scaling in. But before that we need to adjust your position size, according to your money management rule. Let’s say you have 10,000 USD account, and your risk per trade is 1%. It’s better to enter 1/3 of your position at 1.3425 and 2/3 at 1.3452 – remember we have to place entry orders slightly before levels, why stops – beyond the levels. So, calculate what lot size you have to open at 1.3425 and what lot at 1.3452. Stop will be the same for both positions – 1.3515, since invalidation point can’t change.

    Pipruit: Let’s see. My total risk in this trade could be just $100. Hence first position risk as 1/3 should be $35, while second position approximately is $65.

    So first lot is 35/(1.3515-1.3425)/100 000 ~ 0.04 standard lot

    Second is 65/(1.3515-1.3452)/100 000 ~ 0.1 standard lot.

    Commander in Pips: Good, so we’ve appointed the second condition:

    Your money management rules have to be achieved

    Commander in Pips: Now look what has happened – the market has shown respect to your ENTRY #1 level – well done, Agreement was solid resistance, but later it has proceeded higher. The market has shown a much flatter CD leg, compared to AB, so you have solid chances for success. Later you also have seen that 1.3463 is 0.786 Fib resistance, so there also was some kind of Agreement.

    Pipruit: I see. And what has happened next?​


    Commander in Pips:
    Heh, I’ll show you… By the way, actually you can apply your stop even at 1.3497, since any slightly move above the high will erase this pattern.


    Chart #2 | EUR/USD 60-min - continuation
    [​IMG]


    Pipruit: Looks nice. I wish all my trades were in such way!

    Commander in Pips: Right. Take into account that your real entry level was (1.3452*0.1+1.3425*0.04)/0.14 = 1.3444 – 16 pips lower than absolute retracement top (1.3460). So “scaling in” framework lets you not catch the market and gamble where and how to enter. Also it can allow you to feel confident that you will not miss the entry that you’ve waited for week or even more. The worst scenario is that you will enter just with 0.04 lot. Still this is much better than skipping a 200 pip move totally, right?

    Pipruit: Absolutely.

    Commander in Pips: Now, and if market will move above 1.3496, where we can scale in?

    Pipruit: We can’t

    Commander in Pips: Why?

    Pipruit: Because in this case market has broken our entry context that is Gartley “222” Sell pattern. Since the market has passed through our invalidation point – we can’t scale in to a miserably losing position. Even more, it will be strange if we will still hold our original 0.04 lot from 1.3425.

    Commander in Pips: Very well. I see you’ve got the point.

    …To a winning position
     
    #1 Sive Morten, Dec 28, 2013
    Lasted edited by : Oct 14, 2016
Thread Status:
Not open for further replies.

Share This Page