Limited profit with unlimited loss potential. What a great idea and a truly exceptional group of statistical geniuses. Why not just sell naked calls on QQQ? At least then you'd have an outside chance to make some money.
My baseline method (sell and hold) is very similar to yours. Good entry, wide stop, milk the trade, etc. I know it works because that's how I ran my account from $9,000 to $16,000 last year. I don't know your timeframe, but I use the weekly and I held onto positions for weeks even months. My stop is wider because my entry is OK but not superior, since I am not a good trader. In this experiment, I want to improve on this baseline method. I want to counter-trade the long term position on a shorter timeframe. A good example will be yesterday: if GTC buy @982 were filled, I would sell again @990 to reestablish my long-term position, after pocketing 8 points. That is the plan. As you can see, the intent is not to take the profit and wait for the next INDEPENDENT trade. The next trade is DEPENDENT on the earlier trade. I will try to reenter quickly because I don't want to lose the long-term position. I tend to over-analyze. As a result, I look for confirmation and assurance when I identify trading opportunities. I hesitate and miss numerous such opportunities. With this in mind, the reason I have a target for the short term counter trade is two folds: 1. It provides me the assurance I need to pull the trigger. I realize trading is a psychological game as well as a statistical game. 2. It provides me the chance to get filled when I am away from the market. I have numerous meetings to attend so I get paid. Hopefully, it is clear now that 5, or 8, or 9 is not that important. TGregg's study just gives me more confidence when it's time to pull the trigger. The whole thing may sound silly to some of you who are highly confident, but I do need this additional assurance. I know my weakness and I am trying to overcome it. Someday maybe I can do without it.
Just one more comment: I would stop making statements of the type above relative to 'not being a good trader'. Frankly, this is not a very empowering type of statement. Perhaps you're just a relatively new trader. Therefore, you have alot of learning ahead of you. None of us learn this game overnight, and most of us are STILL learning, including me. So why not refer to yourself as a 'work in progress'? You know, most 'good' traders are 'good', not necessarily because they get the best entry, or know the most about economics, or found a 'holy grail' type of system to trade with. Rather, they are good observers first. Good observers of the market, why it acts the way it does, when, how it relates to news announcements, etc etc. An observer does not just look at charts at night. This might teach you some things....but it's much more important to be able to observe what happens and why throughout the day, when things are moving around, news is being announced, stocks are trading, the bond market is moving, etc etc. Second, the good trader eventually must understand and become comfortable with risk. Risk is what creates reward. Most traders develop ways to deal with this risk, such as money management, trade management, stop losses, etc. The good trader eventually understands that he must learn to sit, wait, not only for the trade to develop, but perhaps for an opportunity in which he can enter with an appropriate risk. Patience is a quality that most traders could learn more about. So while you're a 'work in progress', I would not think of myself or refer to myself as 'not being good'. Not a good thought to program yourself with. OldTrader
This is not statistics. This is "the probability of raining tomorrow is 50%". Statistical information you may find useful in the market include things like "the chance of the price revisiting its current level sometime in the future is very high".
I recognize the difference. You can call my action superstition if you want, but it does give me comfort. Trading is a psychological game. I know I need confidence, and this is giving me confidence. The technical aspect is secondary.