Scaling into larger positions vs. buying in with one entry

Something I have been struggling with lately is entering into A+ setups with the correct tier size at the correct price. For me, finding the A+ setup is not the issue. I recognize the setup when I see it. The issue for me this month has been ultimately executing on the game plan.

15 min chart ETH

For example, the other night in ETH, this was an A+ trade for me. Huge move off lows catching all of the bears short with their pants down. It truly was an incredibly random move. I’ll be the first to admit it caught me off guard initially as well. Right off the Bitcoin Gold hard fork activation. Yes ETH was oversold on the daily, but the ferocity of the move was unreal. The squeeze was on big time, from $283 to $310, all in a matter of an hour.

So, my question was, how do I enter this potential 123 pattern on a shorter term timeframe? In the past, I have made a single purchase, essentially betting on myself to catch the low tick of the “2” move.

If you fail to catch the low tick of that quick spike down move, it can get very nerve-wracking trying to hold on to your position into a fast tape like the one we had the other night. Quite difficult to know what your true risk is.

In my estimation, this may be a bit too aggressive (and overconfident). The fact is I only catch bottoms perfectly every now and then. I have yet to meet a trader that catches the ideal top or bottom every time. Maybe there is someone out there that does. I cannot make that claim.

123 pattern ETH 15 min chart

So, in order to give myself more confidence in holding these A+ setups with more size, I have been scaling into these positions over the course of the trade. With time comes more information, and a higher probability of getting paid in the trade.

not my entries, but if I were going to re-trade this, this is how I would have done it.

Tonight, I scaled into this position on the pullback to $300 (100% on the bid, gotta love GDAX no fees policy for providing liquidity), and while my execution was a bit sloppy (average entry around $304.5 was not ideal at all, I didn’t get nearly the size I was looking for, also had to enter and exit a few times before I got into the real move), I felt far more comfortable in this trade. And I plan to use this strategy going forward into market corrections.

The annoying part?

The failure at $310 and a breakdown below $304 the next day. Zero follow through.

Lessons to be learned:

  1. Take trades when you can, not when you have to. I should have taken some sales into 310 area when it failed a second time. A 2% is better than nothing, and it would have made the trade a small win vs. a small loss.
  2. Sometimes the market doesn’t always give you what you want financially. I came out with a small loss on this one. However if you can’t at least take away a trading lesson from the day, then maybe you need to re-evaluate what you could have done better. I like to think of taking a market loss as the same thing as paying for a day of private tutoring from the harshest teacher in the world, the crypto market. Make sure you get something out of it.

All I know is that the next trade where there is follow through, rest assured I’ll be involved with the correct size, from the correct price(s).


One clap, two clap, three clap, forty?

By clapping more or less, you can signal to us which stories really stand out.