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Yeah if I did not take money off on this trade I would have made more than 3 times my initial risk. Maybe I am taking unnecessary risk by taking money off once it goes my way. I can see why that could be a mistake. And for me its a mental crutch.
I looked back at my prior trades and found that if I did not scale out of half my position early I would have in fact made more money and risked less. This week I will not scale out initially. I will mostly look to swing my positions and adjust targets as I get more information. I will be looking to get at least 2-4R most of the time but if the position does not look valid anymore I will scalp out.
I have been struggling with this for a while now. Basically if you move your stop to break even after the first target is hit you will reduce the probability of the running contract. The market loves to come back and take it out.
Lets say you are trading two contracts. You take a trade and you set your first target at 1xR and the other at 3xR. The Market takes your first target out and you move your stop to BE. The market then comes back to BE.
Your total reward is cut in half and your total risk is the same. So you make 50 dollars but risk 100. The swing contract will have a low probability. So the losses will kill you. That's why I stopped moving to break even.
At least this is my experience. If you can be right 80% of the time then you will be in the green no mater what.
On a side note.... I am talking about scaling 50/50 here. I think it would be different trading 10 contracts and swinging 2 at BE like Mack.
Well there is no mathematical proof of this, is there? Your conclusion is based on the losses of break even compared to the winners of the second target (which you can always move in both directions).
Let me put it in different way, if you move your stop for the second target to break even plus 1R
What could you loose? Nothing, nothing at all if the market didn't come back and continue.
What could you win? You will win as far the market goes in your direction.
So in your 2 contract example, instead of moving the stop to break even, you can move it to break even plus the first target.
Of course the market will hit the stop for the second target but it's for sure not 100%. Meaning you will get % winners when you move the stop to break even plus first target.
My point you can always control the second target, so it doesn't have to be break even, and it doesn't have to risk 2:1
I'm sure there are plenty of traders who can scale out quick and move the stop to BE. Don't get me wrong, I am not absolute and am just trying to figure out what works best for me.
I don't know about you or other traders, I am wrong a lot and a lot of those losers don't even go my way at all. Therefor if the majority of my winning trades go 1xR but come back and hit BE and the majority of my losers lose right away with both contracts, then the math is wrong. Most of my losers lose right away without the 1st target being hit. Its all about the larger initial risk. The backbone of my trading is catching swings and taking 1 off at 1R did not really help me it just made my initial risk a lot more. I consider myself more of a intraday swing trader than a scalper so taking greater initial risk on a trade does not make sense to me anymore.
I am wide open for any suggestions or opinions. My opinions could very well be 100% wrong so I am open to anything.
it takes a lot of chart time to improve your entries and develop your trade management and exits. Each trader is different and it takes time to finally be confident in your trading process.
I used to trade using 2 targets, but I finally ended up doing something like what ghl123 was describing. I trade futures indexes and futures currencies and use 2-4 contracts depending on the trading symbol. After entry, a stoploss and initial profit target is set. After price moves in the direction of the trade, stops and profit targets are moved up, at intervals, as profits increase depending on how price action behaves. That way the moving stop can protect profit in case price reverses and the profit target catches strong trending trades. This is something that is very difficult to do manually.
I see that you also use tradestation.... how do you like it.