I wouldn't base your exit for one strategy on another independent strategy. Design each to be the best that you can make them and then see how they perform together. I trade MR and I don't use stops either.
When you guys use RTM without stops do you guys average down ? How does the position management goes exactly ? Thanks
I don't average down. Larry Connors likes to do this and it can achieve some very high win rates, but then the winners are smaller relative to the losers. Too risky for me.
I don't like that fancy term "expectancy". Why don't you simply say that what matters is making a net profit. It is equivalent mathematically to having positive expectancy as it is shown in this blog: http://www.priceactionlab.com/Blog/2010/12/what-is-a-trading-edge-part-ii/
Well what matters to me is risk adjusted returns. I looked at Connors method to scale in, and what happens is that he has lots of small winners, then several very large losers (due to correlation since it was an ETF strategy). Because he can have several large losers at the same time and because the winners are small by comparison, the drawdowns can be significant. I see no reason to try to adapt this strategy to stocks. I would rather take a new position in another stock than add to a losing position. Here is a more technical argument against averaging in: http://epchan.blogspot.com/2010/01/does-averaging-in-work.html Don