profit on the earlier position, If ~successful, eventually a signal would
be received to move up to a 60-minute bar, a 90.minute bar, and so
on, risking more but being buffered by the profit on the earlier positions
and allowing, perhaps, for greater profit with each incremental
increase in the time-frame.
In actual practice, a trader would not use so many multiple increments.
The idea, however, is that a successful trade in a short
time-frame bar will offer a profit in a position to buffer the level of
risk in a medium time-frame bar. If there is a profit in the medium
time-frame, a buffer against the risk will be taken in an even longer
time-frame bar, and so on. This is the concept of “scaling-up” to
‘higher or longer-term time-frames.
“Dropping-down” in time involves taking signals from very
short-term price movement in order to improve entries. A shortterm
pull-back or retracement often follows after an initial entry
,signal is generated. With careful observation, this technique can
,provide an opportunity to enter the market at a slightly more favorable
level. At the very least, it can compensate for the normal
execution losses (slippage) and brokerage commissions that decrease
trading profits.