THIS ^^^^^^^^ I was writing another long winded story to say exactly that. But with more words. EDIT: keep getting side tracked - by this exact issue - at 2:42 the USDJPY broke trend to the downside - then some one (Deutsche?) stepped in buying volume - having to go with the flow buying and selling and make a profit on both ways - glad I'm not in the U.S. and constrained by FIFO, EDIT #2: when I say broke trend it is on a LOW time frame EDIT #3: angry at myself for fucking around reading a forum while I had trade in play and had not set an alert for a price level ..... could have caught this much sooner at -1/2 standard deviation if I had been paying attention and made more money. Trade or play, pick one.
How is a US person constrained by FIFO? In the end, it doesn't make any difference to the overall p&l if you make a number of manoeuvres...maybe from a tax point of view...but that wouldn't apply to day trading.
You are absolutely correct. Theoretically there is no impact on final profitability by FIFO. The problem is that I am not that clever. In situations like this afternoon (which are rather rare in my trading); with sudden volatility, the price spiking down (stop hunting) and then immediately up, I am going long and short a currency pair at the same time at different price levels. I exit the longs and the shorts at different price levels where the entries are shuffled and not consecutive in time. You are correct, this can indeed be managed in a FIFO environment. But due to my mentally deficiencies I need to see the multiple exits clearly and simply defined so I can manage them in real time in a single account. At the end of the day it all worked out and profit was booked from both.
I think I should have been more specific in my OP. Let's say I spot a setup on the chart of stock xyz that has a 95% probability of going higher so I jump in. xyz moves higher and few minutes later it reaches my target and xyz enters a consolidation/pullback /retracement. At this point let's say it has a 60% probability of going higher. If I wasn't already in the trade I wouldn't jump into something that has only a 60% probability of going higher. But since I am already in it I figure if it does fail I will be giving back some of my profits and not my original capital. However, I think it is best to consider the risk of each leg individually and not take riskier trades because I made a profit on the last leg. I guess this problem boils down to the dilemma of if I am too risk averse I end up missing many of the 2nd leg moves. Whereas if I take on too much risk I end up giving my profits back. I need to find a happy medium.
Take the profit and do it again. If you're right 95% of the time, what does the size of your winners matter?
Well, it does matter since she might make only 1 when right 95 times but lose 100 when she's not right the other 5 times. Btw, to the OP, how do you figure you have a 95% probability of being right on a given trade? How do you know it's not 90%, or 80% or something else?
We've discussed before the 95% directional accuracy (or 90%, at least) ... these trades are not for me.
My point wasn't that it's a good trade strategy...I doubt the 95%. On outright trades though (as opposed to options, for example), it's petty tough to imagine an unprofitable strategy with 95% accuracy.