Scaling

-11/4

+11/2

ISCALIING TRADESI

"For Day & Swing Traders

Tuesday, J1une '15~ 20'10

'"th J' h L ' Ul'Th" C' 'n et Add'"t'l~

WI,", ,0 , 'n, ,et;!', I" 'e ",' "a, , " 'U;,

@Weekly:TA

1M

-1/4

Intlroduction

"Whe.rJ .1 ,am .bea.ris.h a.nd I se,1I a stocK, each sale .must .beata/owe,r ./evel tha.f1 the p.revious sa/e, .. Whe.n .iambuying, the .reve.rse is true .. 1 must buy o.na .rising scale .. tdo.n't buy tong stock on a .scale down, .ibay ona s,cafe up ."

. - ,Jesse Livetmo.re

Psychological IE,ffects

EN[)OWMENT EffECT:

"Th,e ,enCOWliliIemlt, ,efie,ct. ts a liiJyp,otl1l,esis tliiJ,at. pe'op!l,e val L!.!I'e aqocd mOlneOIi1lCe tliiJeiilr plI"operty right, io, :it has be,eli1l e!sta.blisbed., ,llli1l. o,tliiJ,er words" pe,op,le p'l,acie a liiJigliiJe'li value 0'11 o,bjied, tliiJ,e:yoiwn lI"!e:jafi've' iooib1:ects tliiJ,ey' do npt"

~~"'Sca!limlg reduces tliiJep!sycliiJo'loglcal temrc,emlcy t.o liliIat,ell'i,a'liz,e this ,e6ect S,lli1Ioeil, is a li1I,atL!.!lIl",ail l,end,eli1lcy fOil" spe,clJ'l,alo'lI"s to ,av,oii dseal ili1l,g at all, ra m p,anti.spe,cL!.!lI,alio'li1Iis,avoid,ea.,

lOSS AVERS.I:ON:

"Less Jav,ell"sj.oliilll",efell"s to peop,le;"s lemldeli1ley ioslliongIYP'lI"et:ell" ,avoiding losses to, acqul lI",e' 'gailiils. S,oim,e sluaiessL!.!Igges,t lliiJa.l, I osse s' ,all"'e twioe .as plowedL!.!lI" plsycliiJ 0.1 olQIca I Iy." as gaili1ls,., Thisl,e,ads 10, risk ,aV1e'lI"s i OIi1l.' ',

""""'Seal i n 9 reduces thl,elols,s ,av,ers;i O'm! 'efied, by red L!.!I cili1l.g fi liiIanoial and e:mo,ti oaaleom mitmeliillsof a lIi,aaer to ,a,p,ariicL!.!Iliar b,ade.lln ,additioliil" a I O,S;SOr1l a. 11!er 1sca]le-i Ii1I is .liliIi li1Ii sCL!.!lI,e eom plall"lea io a lo,ia] po,silion ] oss,

RIISK AVERSION I PROSPECT l'HEORY

Prospect 'T'heory IModel

Hypoih,elical Total fl'olsiiiioml' G,ains. value

Losses

Gains

HypotlMl:eii cal Scal~e Gai mi,S value

Losses

Gains

Rie~erenoe point

ouh::nme

Prospect 'T'heolry IModel

Losses

outcome

Gains

HvpoUiI,e,ticaIScale' los,s/BIi'ea.k:eiv,e'li1 value

Gains

outlQome

rw·oi-fi!eli": SOWo 150% 7'5°1{j 12:5°10

Thli"'e·e-lier.: ·SOO{o 12:5°{0 12:5% 33% 133% 13·3% 50% 130% 12.001{j

'T'ier Systems

Sell1t®r%

Sell 114

Add 1f2:

Short 1.14

Cover "1 t®r%

Short. 3M

Short. 114

5,cenario #'1

?

?

?

Ability to kli'il.ow EXAClib'adable· interim tOpis, ,amid b,oHoms .ili'il a Ji:Hnililil,alilf fr,end isimp,os.sibl'e.

P'Ii',ev reststance hotels, as p'Ii"e!s!ernts,1LI p,p,oll1

Ability to know EXAClib'adable' interim tapis, ,amid b,oHoms ,iliil a Ji:Hnililil,alilf fli',end isimp,os,sibl'e.

Ability to, kli'ilow EXAC1i tradable IlI1Iter:im tOPiS, a Ii'iIC b.o:ilo'.ms i Ii'iI ,a.J;:Htim,a Ii)f bien d Islmpessl blie.

P,atli:'em: Bull flag

Scenario #'1,.3

FAilURE

Choices:

1l' Exit2:li1Ic lii'er fair b~e 2)1 E~it. 'eli1lti F,e p'ositiion 3)1 nQ Ii1I QtI'ili Ii1Ig

Ability 1.0' know EXACT b,aa,ableintiel!iim top's, a Ii1IC b.o,Ho:liJiIs,i Ii1I ,aJ!:H:tm,a Ii)f b,en d Islmpessl bi'e.

S,cenario #2

1ii,er 1 Sc,ale-i n 'Is ~ort)I:$!3",3{IO ! •• !.,pfiioli 10' bli,e,alk:da,wmI

"ie,:dboak descend i mI,g tri'iang Ie: p,afrli:'e'lil'ilsWiggests t~,af UiI:e tl1'ia,mI 9 I'e wi II ,e'.X:8,clL!rie to t~e da,wmls:ide' as a ca'li1tifilll.il,aiioml ,of t~,e 'e'x.istililg daiwmltrend.

I~I 'till',

li,er 1 S,eale.;ilill(s.hort):·$,31,,3'OO .... pl~i or to br,elakd O'WIil

1)1 Add Tier .2:$3,.3,OD 2:)1 Hold liter 1.:$;3",3mll

, t' , .' .. '

1} Covler "Jj'e'r 1 shod p,ois'itiomJ -r-'..!I- [DoL

2)1 "Hcdd "lier 1 st1Jor1 p,ositiomJ I .

Add 2nd 0' 3,d lie, upo~ illlmediaie .,econdaoy bre,akdown '-,

Cfiloioes:

S,cenario #2,.3

-

I~

,at 'Oil' nea Ii" bll'ea.I<:,e'V1eliil ...

----~~~------~~~~~

I

rn Queslio~,abl,e candle - no triggell' 1.0 ,add 2:lI'1d li,ell'stiJQri

"lite'!!"' 1 S,ca'I,e,-i IiiI '(s.tiJ ori)':$3,,30Q ... p'ri 011' la, b!r,e,ak;do,wliiI

:I;f YO:l!.!I ,add,ed Y;O'ln: ,eliiltili",e $,10.,,000 p'osIfio'liiIaliild lI"efus,ed 1.0 cover; ttiJeliil. YOl!.!l will tiJaV1e .i IiiI C'WI rr.edli11l,8ssiv,elo,s.s'es .. ,

Bys,calilmg :iliil1J30,fYQlluiliiltended po,sitioliil, 'wo'lI'st.ca.s,e' lI'i.sl<: dililliliillstiJ·ed

.s igliilifica IiiItly ,ana y,oWl ,ar'egiV1en acha IiiI ce to~et out. eV,eliilO'1I' wittiJ Just ,a.s,clI',a.icfil ..

Tarqets for 5,cale Trades

1)1 Use ,of liJiIov.ingaver,ag'esoE'1llil'ilu'ltipile tiliJil,e fr,alil'il,e.s· lIJiIa.icli'il,ed w,ifli'ilspedficstyle ,2:)1 Us'e' 'o,f ilillaiv,ich.!l,al calillcHesficl!c:s", ]liIIcludilillQ liIiglil~lo{w r,a.lillges

3) Us,eo,f clMlad, slJ,llpporiJ'r,es:ista,1iII celevels

4)1 U se ,0,fspecJficcl1lan,p,attiems

5)1 IU liIIus,ILiI,al p'lnioetvollLillilile li"'e,I,ati o,E'1I.sl1li Pi

1 st. Tier Scale-in's::

1)1 I'nitial high-probability setup 2} ImrnediateW upon brea.kouts

2nd Tler Scale-in's:

1) Follow-through of initial high-probsebJp'

2) Subsequent. bre'akouis

-ls tlMlel1",8 l1"e'liabil,e' ,and ~estedslLlIp'p,od? ,Iif WI1"'O'liiIg.! ....

~Ils volWll!)iI,e dryiliilg WI Pi dWll1"iliilQ OOrlls,o:nd,aiioliil'?

-ls thel1"le' aboun oe$sp;i k.'e off olfsL!l p'p,od 0'1111 v,olWI 1iJ1J!E:V?' - 1 "Y,o'lLilcan 1tiJ0,Id fO'1i a d d iii onal ~e,sts .atisWl p'p,ort.

I

:If li1i,glMlt" COIiiI,S ide Ii ,add i lI1I.g Ii~eli .2:

... ----- ... -PWI'llba.ckslLlIcoelssfu'lly lMIe:ld -Po,sltio'liiIls bl1"'e!akhilgoiWlt to liiI,e'w IMIIgIMI,s

-ConsIdeli ,addiliilQ .21111d ti:e,11" UP'O'1I1I bli",e,akoWlt.

1)1 Ap'J~NiO'p'lI"i.ate conti IiiUllaii o'lilili",e'v,e'lrs,alcaliilclUesticl!c.s ... _ ... 2:)1 Mai,liiImov'iliilg ,av,ell",ag.,es witliililil area

3) WRII1E DOWN pr'obabl,e leVielso,f ,eliiltry ,alli'ld ,e.xit,

Re,li,abl,e long S,ebllp's: bWlIl flags" ,a,s,oending bi,angles" desc w'edg'e'." Do,Ho,ms" SWlp'p'on" ,e1te.,

Mind [Map

HigtiJ.-PlI"obability

Re,li,ablle Shod, S,etWlp,s: bela II" lI,ags", desc tria IiiIgl,es" ase w'edges" parabnllcs to'pIS~ resistanee

1) Exbe:niI,e,ly .1iiI ig IiiI plmba bi I ity: 50%+ 2)1 Medi,Wlm-to-l1Iigl1l p'lI"obabilify: 25Wo+ 3')1 D'oliil'tcons:idell"oUiler tll",ades,

1)linitial ta,II"Q,ets, .met: .:2:5-5,0%

,2:) Exit, cOliilfideliilce is Jow.:50-1iQoo/o

3) Hdld Ii"email"ililiilg lmtHsigliilso,f faihu,e

4),80alels ca.1il be tailo'Ii,ed lO'1i use witlMlstQP,s .. sto'p,I,ev,elssboWlld be pl,aoedilillieiafio'lil to, ,ap'p'lI'opli'iat'e tall'Q'etsbry usl Iilgmov,i Iilg ,a.Vlell'a.g,e's" candles, ·S·WI p~II"es" letc ...

5:)1 TheslmaHer tlMl,e p,ositiolilsiz:e" tlMl,eless ,emotiona't ,and fililam::ial. CO:lliUliIitm'ent YOlulMI,ave .. UN[HERSTAND tlhl:at,altllilquglMl YO'WI :may liIot."m,ake as .muclMJ"" you are ,elils,luecl'.an 'e:dlie;m:ely low dslk w,ay ·o,f :lJIa.lila.ging y,ol!.!lll' J~H.)rtfolio ..

6)1 no NOT add to, a .Io<_sirilig ti'ell'." ,ev'ell'. D'mil't. ,ev,eli'"eveli'" ,eve I!' .coil. Addili'ilg to, a 10lsillg nell' Iilolt o'lilly ·.i n creases YOWl Ii' tis,k"biut. a ts,omag Iilifi'e,s 1.il1il1il,e'cies.s,a.w·1 oss ..

'9')' WlMlelil trading .andlifJt helps, write· dowlilspedfic reascns.as t.o wilily' YO'WI atesealtng i IilOIl'Ol!.!lt WIi'.ite aO\l)1Ii'iI tlMle lI',ati onale ...

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