Daytrading question I'm really stuck on related to profit-taking, and the perennial catch-22 of "letting runners run" without giving back too much of your profits when the runners come up lame. What I'm wondering is does anyone here employ a re-entry strategy to work around that problem? What I'm envisioning is very simple. As soon as you enter, you determine the expected spot of strongest resistance. You exit as soon as that spot is hit. If you were right, and it reverses to where your initial stop woulda been, then you're a genius! You basically guarded all of it. If it looks like you're wrong, and it busts through resistance, then you re-enter, but only risk back to your original stop as though you'd never left the trade. Result: on all the trades where you were right to exit, you're basically guarding 100% of possible profits. On all the ones where you were wrong to exit, you've at least re-entered to catch most of the remaining move. And on ones where you're fooled into re-entering but it reverses on you anyway, you still close out at a profit, perhaps slightly smaller, assuming your re-entry was at a slightly worse price than your exit point. Curious if this kind of re-entry approach has a standard name? Do you think it's the worst of both worlds or the best of both worlds? For context, I daytrade QQQ, and I'm worried that I'm just asking too much from the moves QQQ has in it. My entries are conservative to begin with, so I tend to enter fairly late into moves, and then my stop method is wide enough to "let runners run." It works like a charm when they do run, but I have too many trades where I'm up about 100 or even 150 cents, and my stop loss lets it run all the way back to break-even. These trades piss me off more than a loss.
Well, your dilemma sounds ideal for a trailing profit stop. You'd just have to double size to see if it's a good fit for you. After first half exits, the other half's stop is brought to the exit with a tiny bit of room for downward stutter, then trail the rest at a distance you see fit.
Like the phrase downward stutter, I'm stealing that! I hadn't thought about it in conjunction with sizing/scaling before, that's interesting. My few attempts at scaling-in were so clumsy that I never even bothered experimenting with scaling-out. I use what I call a "hopping stop" now (not sure if it has a name?), but mine doesn't trail gradually along point by point, it hops up a level each time price hits a new level. I've got it pretty well-tuned so when runners really run I look like Nostradamus, but I think I'm just giving away too many singles and doubles for a couple home runs a month. Just can't make the math add up.
Every trade is independent, hence called day trade. Wait for the same or opposite setup, size doesn’t matter. The market is always there.
The problem is, it will almost always stop, studder, retrace at a local resistance level. So much that it is a high probability play. So I take the overshoot only for part, if at all. Otherwise, if the plan was a larger target, then use the retrace overshoot, as a second entry. So 2 contracts in, one out at the overshoot, one in at the retrace overshoot. Then two out at the final target, one early, one on the overshoot or at the top of the studder. Likewise, 1 out if the SL hit and another at the retrace of the SL. Lots of fast trading to do manually though, and don't recommend it as it is not a sustainable routine. As for a name, I would not know.
The last time I reenter after profit taking (AKA FICKLE MINDED TRADING) was more than a decade ago. Since then, I don't do such a thing.
I never exit based on something possibly happening. Anything is possible all the time. Stop loss exit should be based on PA which negates staying in the trade, it did what it wasn't supposed to do. Profit exit should be trailed once it does what it it is supposed to do.
I hear ya there, but by the time I'm sure what shouldn't have happened happened, as you nicely put it, I've usually given back enough already that I may as well just stick with my original stop. I'm just trying to find some way around that problem.
My two cents, it depends on what kind of trader you are/want to be; what can you comfortably/enjoyably handle emotionally... I prefer scale in/all out at my target unless PA says to get out before it hits. If context and PA are good, and I didn't just get out at a swing target then I'll get back in on smaller size. I wouldn't recommend that to someone asking this question though. If I exited at a swing target I might get back in, but it probably isn't going to be in the same direction.