I thought Barjon had explained this previously....stop using stops and start using a hedge when required. The hedge need only serve to neutralize any offside open position until such time as the fog clears. Once neutralizing has been mastered, then we can move on to biasing on either side of the pair play.
CV, are you talking about pairs trading here or something different?
Something I have done is to have multiple trades on one instrument in different directions at one time, and varied the position size depending on my confidence and reading on the situation.
For example if I was in a long term uptrend I would reduce my position size on shorter term down trends and add to my position again on the shorter term up trend. And add again on the resumption of the longer term trend.
And on the longer term perceived cycle high I would sometimes completely hedge with an equal and opposing short trade.
Now this complete hedge sounds crazy and a waste of a spread. But I believe it has kept me in the trade in the direction of the longer term trend. This is because if I sold my position instead of hedging it and got completely out of the trade it is a lot more effort for me to get back in.
Once in a hedged trade I need to take an action, which in most cases would be taking off the hedge or lightening the load. So I am instantly back in the trade, otherwise I would procrastinate so much that I would miss some of the trend resumption or miss it completely because my eye was no longer on the ball.
What are your views on this or are you talking about pure pairs play?
Jason
