Depending on the environment, the situation, and the setup, I may shoot for a target but I predominantly attempt to manage most trades so that I might be able to take advantage of a significant extension if one should develop. I am, generally, targeting areas where I believe these types of extensions are likely to manifest, though. The result of this type of liberal trade management is a series of marginally profitable trades coupled with less frequent base hits. I may alter this strategy if/when my rules deem it appropriate and manage trades in a more conservative fashion. This may include the use of targets. With liberal trade management, the marginally profitable intraday trades average just over a 1-to-1 ratio and the base hits average a 1-to-4 ratio. Conservative intraday trade management averages a bit over a 1-to-2 ratio. Please keep in mind that Iâm giving you a synthesis of all my setupâs average P/L ratios. It is, therefore, not a nuanced picture of the results. Iâve compared conservative methods of trade management with more liberal methods. I use the term âliberalâ to indicate a method that allows for market ânoiseâ through the use of wider trailing stops or a system that is equally sensitive to both exit and re-entry during the course of the extension. As you might imagine, liberal types of management can have a tendency to give back a fair amount of âin-tradeâ profits but are excellent for seizing large profits when applicable. My experience has led me to the conclusion that both methods run neck and neck in terms of total profitability with a nod going to the more liberal in the long haul. As Kicking pointed out, quit correctly in my opinion, attempting to collar significant extensions has proven to be best for the bottom line. At least, this is true in my case. As Iâve already mentioned, this is more likely to be achieved through a liberal form of trade management as opposed to a more conservative and consistent method. I have spent a great deal of time developing techniques and rules to adjust my trade management to fit the environment so that I may capitalize on whichever method the market favors. If the explanation above is too abstract, thatâs okay. The primary concept I try to get across is the benefit of developing rules to determine the current bias, which can change throughout the day, and the type of environment/market you are trading in at the time, which can also change throughout the day. You can then begin to design different forms of trade management appropriate to each of these environments. Not only do these rules help determine how you handle a trade but they also assist a trader to trade in favor of the bias, which generates a greater number of winning trades. Trades that often lack the type of grinding pressure that characterizes many counter-trend positions.
if you do how do you manage the stops or the lack of viable globex stops. have you thought of using options on overnight or the cost of this kind of "insurance" negates the purpose of it ? When you talk about extention, I think I understand you saying extended move in one direction follow by a next day of a similar directional move.