How to build up a trade?

[sloth456]

I've heard/read Peter talk about "building" a trade several times.

From the jist of this I think what he means is that he'll continue to put more money in the more confident he is about the trade.

I'm wondering if anyone can be more specific about that.

1) What makes you confident enough to keep putting more in. Right now, personally I put more in with each successful trade. I'll wait for 1 trade to close with a profit before repeating the same thing. I use the same stake again. Do you think that this is a good approach or maybe I should increase my stake on the 2nd successful trade to maximise my profit? (downside is increasing exposure for a loss)

2) What if your first trade closes at a loss? I find when I read the market wrong and take a loss my inclination is to enter again to try and recover the loss, sometimes with success but when it goes wrong I've usually increased my exposure too much. Is it better to quit and then look at the screen recording later to try and understand what went wrong?

Would love an insight for anyone, perhaps even Peter himself wouldn't mind commenting?

[SeaHorseRacing]

1) Yes that is very good risk management. When I traded the first race at Cheltenham this week, I went in full aggressive trading with stacks either side of the book and it worked really well for about 30 mins... come the 10 mins to post, the prices went a little wild and not only did I stop interpreting the market, I never really managed my risk very well. I have only been doing this 18 months but I always start my trade with a 1/4 of the stake I think I want to use for the market. The more the market behaves how I think it should than the more I add to my position or individual trades. It all depends when volume is coming into the market too. But with Saturdays I tend to do that less and usually use and start with one selected stake, just because I find the markets are more decisive and less volatile for an instant snap back.

If it looks really volatile I will use maybe even smaller stakes.

I think one of the worse traits a trader can have is instantly jumping into the market after a loss. I am guilty of this. I noticed from my screen recordings that after taking a loss, I was still opening speculative positions when there was 10 seconds to post. I think this falls down to personality but for me its something I have really had to work on. Its so important to re evaluate the market after each trade. Even with scalping. Sometimes you can be in an early trade and when the volume hits the market it can just change. A swing market can just turn into a 3/4 tick noise market and the same for reverse.

With really volatile markets when crunching up your stakes into little pieces, its ok to get it wrong 4/5/6 even more times because the opportunity to profit can still come. especially if your trading a break out as if the price breaks out you can feel pretty confident on getting your whole stake on. There is so many angles to discuss this.

It also depends on where I am taking the loss. For example if the price is in a 4/5 tick range and the market is generally going sideways. If I am trading on the edge of the traded range for a break out, I can generally use a bigger stakes because I usually will only allow myself for a one tick loss on this situation. It either breaks or doesn't. Sometimes I could do this 3/4 times.. but i always re evaluate my situation.

I find compounding losses are bad too. Jumping in, closing out from noise and doing it over and over.
Do it once, re evaluate... try again. Maybe it just doesnt work. These situations I used to lose massively so much more than I should. it doesnt take long to do this and put yourself in a position where you cant profit for the rest of the day.

But this does happen, you will get markets where you attempt maybe 5/6 times and still cant get it right but when you use a stake divided up this equals just one normal loss to the average person.

Everybody trades differently and everybody minds works differently.

For me, id rather make a little than take a bigger loss.

If you can mentally overcome losing runs and bigger losses, I believe you could just trade with one stake on every market (assuming you have an edge) but for me I dont like to get in a mess and Id rather take a smaller loss and miss out on a huge move than be hit with bigger losses, This is just what works for me.

[ShaunWhite]

I've heard/read Peter talk about "building" a trade several times.

I'm wondering if anyone can be more specific about that.

1) What makes you confident enough to keep putting more in. Right now, personally I put more in with each successful trade.

My interpretation of the term is that it's varying the size of your position during the execution of a single trade.

Your decision to increase or decrease the size of your trade (while it's open) is dependant upon your confidence in the market doing what you hope for.

eg
..You think a price will move out, so you invest £10,
..It starts to move and has every indiction it will continue, so you increase your stake to 20, in line with your confidence/evidence.
..It begins to slow or signals indicate a reverse is likely, so you reduce your exposure to £10 (taking some of the profit),
..The signals reverse and the trend continues in your favour, so you increase your exposure to 20 again, or 30.

Your stake within a single open/close trade cycle, ebbs and flows.

A graph of your confidence in a position should pretty much overlay a graph of your exposure/risk/trade size. Then when the next event starts, or the next trade on the same event starts, begin again with your minimum stake size or with a stake that matches your confidence in what your are seeing. Success or failure in the previous trade or market should have no bearing on the next, unless it revealed that some particularly favourable/detrimental market conditions were prevailing.

You could probably write a chapter on the subject but that's the gist of it imho.

[ShaunWhite]

Is it better to quit and then look at the screen recording later to try and understand what went wrong?

That will tell you whether or not you made a wise decision at the second you hit the button, and that is useful. But after that point, the market will do whatever it likes, and all you can do is to continually assess. In that respect there's no "what went right or wrong", you can't legislate for a huge backer or layer to join the party or a horse to start acting up. Screen recordings will show what a market did and often why, but they are more useful for seeing what you did, or didn't do in response.

It's also worth remembering that reviewing a vid of your trading a day or a week later will probably tell you more about yourself that revieiwing it immediately, and don't just look at the bad trades, knowing what went well is just as important sometimes. (yet another thing I should do more often, talk is cheap )