Hi guys, Newbie here.
I’ve been hearing the mention in certain groups regarding easing-in and easing-out of a position. I understand the concept to a degree, but would like some additional insights. However, I am struggling a bit to find some solid documentation/tips on how to go about effectively apply this in your trading.
Could you perhaps recommend any article or training videos that will assist in this regard?
Thank you very much in advance.
I also actually confused by the theory. are there from other members who wish to explain?
Same here; I’m also confused about that group; in addition; waiting for his clarification.
You can call this by a few different names, scaling or fading in or out.
Let’s say you identify a trades long term potential of several hundred pips. Gold was a good example recently on the 4 hour chart. as price action moves along the tracks there are train stations or rest spots were PA waits for supply and demand to continue. When it does the train leaves the station once again, typically we call that a breakout. When the train pulls out that is also the period of the highest momentum. Always a great spot to add a few more trades. (on the platform I use a trader can not close part of a trade so we use multiples)
Along with that metaphone if your keeping track of your risk management you can increase the trades when there is an appropriate increase in your equity your can add more to your scaling in and maintain the same desired risk level)
Ok a similar process for fading out, however lets relate this to percentage of deviation from the mean. If your were to place the price action on a standard bell curve the 1% deviation is where most of your trades stop, and 2% is most of the rest and 3/4 % is a very small percentage. This is very visible using the Bollinger Bands and you can set your percentages as desired. So POV PA moves from the mean outward to its furthest deviation you can fade out and capture profit as PA is moving along its track. However your risk of the trade closing is increasing as PA moves further away from the mean. We know PA id going to reverse at some point but we also do not know when that is and there are a lot of pips in the higher areas. Thus by scaling out we can take profit as the PS moves.
Hopefully I’, awake enough that my explanation was understandable.
Moving on some of us trade what called the mean reversion. We wait until PA gets out to the 2% and when it starts back to the mean enter into the trade toward the mean or beyond to the next mean to capture the full movement end to end.
I’ll stop there before I get to far off the question.
You will see “sell the highs” or “buy the Lows”.
Imagine that you wish to sell GBP, you are confident of direction but you cannot know price.
You have 1000 gbps to sell. So you decide to enter the market in 5 segments of 200 each. So if price rises against you then you enter, it goes in your direction and you enter again, yet more in your direction, so in again. Now there is a pull back - you enter again and so on.
You will end up with an average price - now you have the option of exiting in one go or averaging out.
Btw there are many different techniques of using this entry/exit method - this past couple of weeks there are some who sell each high in the pound basing that on the theory that Brexit will cause a fall off, there are others doing the opposite.
The advantage of scaling in is that if price heads off in the wrong direction before you are fully loaded then there is less loss.