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Hi all. (My first question here; will introduce myself later on)
Hypothetical situation:
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I bought at the beginning of a bull breakout. One contract only ("I don't care" size).
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My initial stop is only 10 ticks away.
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Therefore, I set my target at (MyPrice + 20 ticks) which, at the moment, exists, possibly, somewhere in the white space beyond "the hard right edge".
- Lo and behold! More bull bars! Moving in my direction! Looks like I might have a profitable trade here!
- Price has now almost reached my "target". It's sitting 2-3 ticks under my "target", in a bull bar.
Question 1: Should I sell at my target, collect my 20-ticks profit. (And then watch in horror as the trend continues for another 2,000 ticks, all without a single pullback. And having failed to earn that extra 2,000 ticks.) OR, should I not only move my target higher, but also BUY another contract (a.k.a. "scale-in")? As a matter of fact, should I keep buying more contracts (and moving my "target"), as the bull trend continues, and eventually collect a profit of 15,000 ticks?
Question 2: How do you answer question No. 1 in a general way? What would be a good, logical way of answering that question?
Thanks for your attention!
14h54: Edited for cosmetics.
As always happens with this kind of questions, the answer is.... it depends! In what? In the context (this answers your second question, the logical way to decide is looking at the context). And now your first question: If the market is in a TR, after several bars, you will be high so it is a good idea to take profits. Rather, if you are in a trend better to let it run...
Scaling-in is an advanced technique, you need to be pretty sure of your reading because you are greatly increasing your risk, so better to learn to trade singles and once you feel confortable you can add more contracts to the position.
Also, as a recommendation, for learning purposes is better to discuss an example chart instead of talking in abstract terms, because the devil is in the details, specially in PA. Here, an example with this Tuesday's emini chart and the swing buy at bar 10:
15 was a DT so the BO abruptly reversed and you had to exit so, here, better to grab the profits before. You can find many more examples of BOs becoming buy climaxes and reversing in the encyclopedia or just simply stuyding the charts.
@ludopuig: Thanks for the response.
You know, my heart has always been with scalping (and small, quick targets). Reading Al Brooks' thoughts, though, my brain can't help but agree with him that it might be a better idea to look at swings instead.
That's quite a different philosophy!
As Ed Seykota says (and sings): "One good trend pays for them all"!
