Here is the reason why I avoid scaling my trades: most of the times I get in a position where I don't want to add to the trade. This is a very clear example, last Friday I was glad it was only a partial position, Today not so much as I've gathered 4% of the overall trade, this 4% would really be almost 8% total if I wasn't scaling. Again, it can very much work on the opposite if the market run against me right away, yet I feel like trading the whole position is one less decision I have to make: when to enter the remaining of the trade..For now, I will continue to monitor this trade as an overall P/L, the one thing getting my attention is the activity in the market, even though vols have dropped again, I feel we're getting into an active environment as opposed to the quiet times we had in the past. See highlights on the daily summary chart.
How do you guys deal with scaling? Do you only add the remaining lots if you're in trouble? So far this is my plan: only add to the position if I have to hedge it further. Typically I would enter as a single package, this time around I didn't because I was just warming up the engines sort of speak and didn't get a fill on the last 2 lots...
Need to check with my partner (wife) for her advice. Considering we're about to have a new baby in the family, I might just take my money and run :)
3 comments:
Hi Gustavo,
Congrats on the new baby!
All the best
Doodel
Hi Gustavo
I have learned so much reading your daily blog. I really look forward to it. To answer your question, I would not commit more capital to the trade unless you need to make an adjustment.
My new motto is: stick with your plan.
In the past I've also lost money trying to stay in a trade longer in order to generate more income to compensate for not being fully scaled in. We learn from our mistakes I guess.
Congratulations on your expected baby.
Dave
Thank you both Dave and Doodel! We're excited about the new addition to the family, just waiting for the call sort of speak :) I hope he hangs in there a few more days for the Grandma to arrive from Brazil..
Dave: Thank you so much for your feedback. I've had the same discussion with my wife Yesterday, I will re-adjust this trade and adjust the P/L to reflect based on the actual capital allocated, not on the total capital I wanted to allocate..
That being said, I will consider this a 3 lot butterfly instead of a 5 lot I had originally planned. I just didn't get a fill on the 2 extra lots and am not ready to add to it right now. Specially after being almost 10% in the first 3 lots in such a short amount of time.
Thanks!
Gustavo
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