ZeroSum
33 posts
msg #112533
- Ignore ZeroSum |
3/31/2013 12:34:09 AM
Is anyone trading stocks (as opposed to ETFs) using Connor's TPS 2-3-5 scale-in approach?
I understand this is a good approach for ETFs (particularly country ETFs) but don't know if it applies to stocks as well.
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Kevin_in_GA
4,599 posts
msg #112537
- Ignore Kevin_in_GA |
3/31/2013 10:23:11 AM
What has always concerned me using this approach is the amount of capital allocated to the first trade - if you have a good system the "2 units, then 3 units, then 5 units" approach advocated by Connors TPS system leaves a LOT of your capital out of play. In essence you hold back 8 units of capital just in case the trade goes lower?
I could see one double down if the price went 5% or 10% down, as long as the stats for losing trades would have my second investment be at a point where the result would likely turn a big loss into a small one, or a win. Even then you are holding back capital that could be at work for you in other trades. The few times I have done this I treat the double down as a separate trade since it keeps my money out of other trades.
My guess is that this approach was designed to show how to turn a loss into a win, but ignores the overall impact on annual return of so much cash out of the market.
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novacane32000
331 posts
msg #112541
- Ignore novacane32000 |
3/31/2013 4:54:43 PM
Scaling in will work very well trading the over all SP500 (SPY).
Different combinations of scaling in need to be used depending on whether the market is trending up or down and based on your drawdown tolerance. You do not necessarily need to to use 8 units ,you can use 4 and scale in one at time and come up with a good system. Once you find something that works you simply start trading SPXL or futures and you have the potential to beat the market annually.
I did some limited testing with stocks and found the drawdowns to be unacceptable.
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