ive been getting in the habit of going in a bit large and grabbing 7 to ten pips then cutting to reasonable size. it is working for me but im in a conundrum about continuing it as i know its not great practice, and actually does not help me stay clinically unemotional through the day, which is my aim. The market for me was clearer last week which gave me more confidence to go larger. i wonder if i could apply some sort of diluted Kelly type criterion for position sizing. I kind of do already in that ive been trying to identify the scalps that have the most potential. Having entered larger than usual, i find it easier to hold remainders big enough to make an account impact should they go to 50 or more pips. Much of that impact is subjective and as such perhaps i should be content with smaller impacts, as wanting it all quick is as we all know a newbie cliche.
Hi MM
It really is a case of testing what works best for you.
If you think about it - and I will try and keep it on simple figures - If you enter with say 3 lots - ie $30 per pip with a normal soft mental stop of 5 pips - then worse case ( normal not extreme ) scenario - loss of $150 .
Now if you are progressing and getting your timing spot on - it will come - within even 20 seconds of entering you might be B/E or up a 1 pip and then if you see it move 4 pips in your favour you have a choice which I will explain now
You could immediately exit 70% whether with 3 pips or 5 pips being better - but lets say 4 pip as $20 - then you are up $80 in ideally 1 to 3 mins or so
Now you have $10 a pip left on - so in theory - it could go 6 pips against your entry point and if you exited - then you still have a net profit of $10 -$20
But lets say - it does not and your original scalp forecast is correct and you make say 12 pips at $10 plus the 4 at $20 you exited first - then end result $200.
Thats a simple first method
Now lets look at more advance methods - let look at 6 lots - as a good size
Same scenario after entry and 4 pips you take some off - but lets say just 60% - so now your immediate profit is $36 x 4 = $144
You are left with $24 still on per pip - and you could let them go 3 or 4 pips in the red below entry and still be in a net profit - but instead - you manage to get to 9 pips and you take $14 off
So - now you have a profit of $144 on $36 exited and 9 x $14 = $126 as well making total $270 and still $10 left on
In theory now you could let the $10 go 15 pips against your entry and still have a net profit of $120 on whole trade
Instead - the pullback is only 12 pips against you and only say 3 or 4 pips in the red and then that $10 goes on to make you say 64 pips over the day = another $640 making $910 off one basic entry with 3 trades off it - and exposure is only your first say 1 -3 mins
You could also just enter at $36 then $14 then $10 all over 1 minute as well and there are even other more advanced ways as well
Hope that helps a bit
Sorry N - talking accountancy here in your thread ;-)
Regards
F