Hey all,
Riddle me this....
Let's say my statistics tell me that on my winning trades I have an average MAE of 8 ticks. For this example, let's assume that I am using a 12 tick initial stop.
Why would I not want to add to my position if/when price is trading against my initial entry around the 8-12 tick area with a smaller stop?
Example:
I enter using a buy stop
market order on CL @ 75.11, my initial stop is $74.99. Shortly after entry, price is trading around $75.03. Why not add more here with a 4 tick stop? Statistics tell me that this is as far against me as it will go, on average. I add to my position with relatively little more risk, but the upside is potentially much larger.
If you think your initial stop is no good any longer, then why are you still in the trade? Why wait for it to hit your stop? Your stop should be placed in such a way that you know you are wrong if your stop is hit.
On the other hand, if you know your stop is good based on your experience and statistics, why not add more with a small stop (still honoring your initial stop) thus allowing a slight bit more risk, but maximizing your upside much more?
2ND part to my riddle:
Best way to
handle this logistically with Ninja?
I currently do the following:
Enter trade with buy stop market order with "
ATM Strategy 1", change to "ATM Strategy 2" (add with 4 tick stop) and place a
limit order 8 ticks from initial entry, and then manage the exits as I normally would; possibly even look to pull off some of the trade near my original entry. Exits will and should be based on statistics and
price action at the time the order is placed.
Ideally, price trades against me enough to fill my additional order, and then moves on like I expected it to move in the first place.
Something to think about......
Thoughts / comments / suggestions?
Thanks,
Gary