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I'm looking for ideas on how to manage my positions for my trading plan for the mini Nasdaq (/MNQ).
My trading strategy yields the following results:
1/3 of all trades are big winners (50-100 points). 1/3 of all trades are small winners (20-50 points). 1/3 of all trades are losers (hit the stop loss at 10 points).
My stop loss of 10 points equates to $20 per contract. I'm considering taking up to 3 contracts per trade ($60 risk), although I'd be more comfortable with a $20 risk (1 contract). My account size is $2,000. However, I'm afraid I won't be able to maximize profit on big winners with only one contract, whereas if I traded 2 or 3 contracts, I could take profit on the first and second contracts and let the 3rd contract ride to capture the bigger moves which are relatively frequent.
If I only take 1 contract, I'd have to set my target at a distance far enough from entry to make good profit but close enough that I'm not forfeiting potential profits on smaller winners. A target at 2R or 3R would be consistent but would miss out on the really big winners but would hit more frequently than a larger target. Any advice on how to go about calculating this to make the most of the results my strategy yields?
If I take 2 contracts, I can take profit at perhaps 1R or 2R (10 or 20 points), and then let it ride with a 2nd higher target. Any advice on how to calculate this to make the most of the results my strategy yields?
If I take 3 contracts, I can take profit at two targets, perhaps 1R/2R and 3R/4R, and let the 3rd contract ride out for the 50+ point winners.
Sometimes a trade reaches +1R-3R, then reverses to just above the stop loss, then continues for an even bigger move. Because of this, I'm weary of moving my stop loss up to breakeven or higher after taking partial profits.
I would love to hear ideas from more experienced traders on how you personally might go about managing a position in this scenario. How would you manage your positions if you were me?
Can you help answer these questions from other members on NexusFi?
I don't get your question. Either your trading strategy yields the stated results or it doesn't.
So one-third of your trades lose 10 points, and two-thirds make between 20 and 100 points. Even if you only made the minimum 20 points on each winning trade that means for every three trades on average you would be making 30 points profit but should be averaging much more
Why do you then go on to discuss whether you should scale out (and reduce profit), or whether to change your stop loss distance. This those stats I would start straight away and build up the account and rapidly increase size with the profit, all-in, all-out starting with one lot and very soon you would have scaled up and be making huge profits.
If you come up with a trading system that has great results like that you trade it exactly how you designed it, otherwise what was the point of testing something different from how you will trade.
Which leaves the question of where did your initial results come from: a decent back test with a large sample of trades from different market conditions, not over optimised, then forward tested in out of sample data; or a long period of REALISTIC real time sim trading with every trade logged; or just more of an aspiration.
You do not win as a trader, you just get to play again the next day. If that game doesn’t appeal to you then you should not trade. Gary Norden
My question is how can I best manage positions to get the most out of the system. If I go all in all out at 2R or 3R I'll be missing out on the 100 point moves, but if I scale out to catch the 100 point moves I'll be lowering profit on the smaller moves. I like the idea of taking partial profit at 1R because sometimes the signals only result in a move higher than 1R but less than 2R.
Given the current volatility of NQ/MNQ, I regard $2,000 as the minimum requirement to trade 1 lot of MNQ (or $20k to trade 1 lot of NQ), for myself.
With $2,000, if confident in the results you've mentioned above, I'd probably just trade 1 lot of MNQ with a 20-point target and a 10-point stop-loss. The expectancy that way is a huge +10 points (+$20) per trade, so it would take me only about 100 trades to double the account.
Then I'd think about trading 2 lots with a 10-point stop-loss, taking one off at +20 points and letting the other run as far as it reasonably will, trailing its stop manually above/below the swings high/low.
