Dave Floyd
Aspen Trading Group
Hi Dave,
I need some help with scaling into trades.
In some of your previous analysis posts, you had phrasing such as:
NZD/USD – scaling into longs between .7487-.7410
AUD/USD – scaling into longs between .7974-.7804
NZD/JPY – scaling into longs between 82.10-81.00
Would I divide my normal position size into 1/3 and wait for the price to hit certain ranges? I’m really lacking skill in this area.
Any help you could give me would be greatly appreciated.
Thanks,
Rick L. – Glenside, PA
Rick,
Thanks for the question. I’m answering it here because I think many people struggle with this aspect of trading.
First, there is no right or wrong approach; it is what works best for you. What you described above fits with how I typically frame a trade set-up, with a few variations. Allow me to explain.
When you are looking to buy a pull-back in an uptrend or sell a rally in a downtrend, we cannot know for certain whether prices are simply correcting or starting a new trend. Sometimes we will nail the turning point; other times the market will roll right over us and take our stops out.
That said, I think it is best to first determine how you will break your trade up. Will you take your max position size (based on the stop-loss and max % risk) and break into 2, 3 or 4 entries?
I think 2 or 3 is a good number ….4 seems like overkill in my opinion.
However, I would rarely enter a full position into the support or resistance zone I am looking at. Remember, as noted above, the market may not give a rip about my so-called resistance or support zone.
Therefore, by putting on a piece at what we believe to be favorable price levels, we put ourselves in position to get a really nice entry if the market then reverses shortly thereafter. If the market continues to move lower or higher we have a modest position on if we get stopped out. Seems like a reasonable trade-off.
I would use the last half or third to add to the position once the market starts to move in the direction you anticipated.
I hope that helps.
Dave
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Editors’ Picks
EUR/USD holds firm near 1.1850 amid USD weakness
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GBP/USD holds medium-term bullish bias above 1.3600
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Editors’ Picks
EUR/USD holds firm near 1.1850 amid USD weakness
EUR/USD remains strongly bid around 1.1850 in European trading on Monday. The USD/JPY slide-led broad US Dollar weakness helps the pair build on Friday's recovery ahead of the Eurozone Sentix Investor Confidence data for February.
USD/JPY keeps the red below 157.00 on intervention risks
The Japanese Yen sticks to its modest intraday recovery gains against a broadly weaker US Dollar on the back of speculations that authorities will step in to stem weakness in the domestic currency. In fact, Japanese officials stepped up intervention warnings and confirmed close coordination with the US against disorderly FX moves. This, in turn, triggered an intraday USD/JPY turnaround from the 157.65 region, or a two-week top, touched in reaction to Prime Minister Sanae Takaichi's landslide win in Sunday's election.
Gold remains supported by China's buying and USD weakness as traders eye US data
Gold struggles to capitalize on its intraday move up and remains below the $5,100 mark heading into the European session amid mixed cues. Data released over the weekend showed that the People's Bank of China extended its buying spree for a 15th month in January. Moreover, dovish US Fed expectations and concerns about the central bank's independence drag the US Dollar lower for the second straight day, providing an additional boost to the non-yielding yellow metal.
Cardano steadies as whale selling caps recovery
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Japanese PM Takaichi nabs unprecedented victory – US data eyed this week
I do not think I would be exaggerating to say that Japanese Prime Minister Sanae Takaichi’s snap general election gamble paid off over the weekend – and then some. This secured the Liberal Democratic Party (LDP) an unprecedented mandate just three months into her tenure.
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