Quote from jj90:
Have you considered some type of modified anti-martingale scaling? Something like 4-2-1-1-1 or 2-2-2-1-1-1 etc? As discussed before the pure anti-martingale 1-2-4-8 etc doesn't work too well unless you have a defined exit point, which of course limits gains.
With scaling, I think it comes down the probability of different reward targets.
You buy a whole number.
You feel very strongly, due to the factors involved and the time of day, that this has a high probability of going 50 cents, where resistance is.
You feel it COULD go a point if the market makes another push up once at your target.
I believe you should exit at least half of your position at a high probability reward target that obviously has proper R:R going for it.
Honestly, exits are probably the hardest part of trade execution in day trading.
There are a lot of factors to take in, and often, trade conditions change after you have entered.
Initially, your target was 50 cents, but now the market is roaring and there is aggressive buying around 50 cents and heavy bids in the high 40s. You make a decision to hold and not sell any here. You set a stop for that portion you planned to exit just below the heavy bids.
Or, lets say your target is almost reached, but a huge offer appears at 48 cents. Are you going to let a top before 2 cents ahead of your target? Take some off.
Different targets have different probabilities. These probabilities tend to change once a trade has begun. Good traders, imo, make good adjustments during a trade.
It is always safer, for newer traders, to follow a stricter plan, as it takes experience to successfully alter your plan during a trade.
Based on your total share size, calculate what combination would yield the best results. These probabilities change as you're in the trade, and you have to adjust your plan accordingly.
Others like to stick with their initial plan, which is often a nice, consistent way to do things, but I think you miss out in the end.
The REASON it can be good to stick with a pre-determined exit plan is that our emotions tend to distort probabilities while we are in a trade. We are in the money, we feel good and boost probabilities to the next reward. It is important to find the right balance.
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To answer,
if you expect a move to last much of the day.
you exit like this
1-1-1-2-3-4
if you expect a move to last 15 minutes
2-4
if you are unsure about how good a move can be
1-4-2-1-1-1
