Original question: Would you be able to explain in more detail about the trimming winners?In the Q&A it is difficult to understand (maybe because I am quite new at this). Does the 3R to 2.6R end up resulting in a calculated amount to scale out by? I think an example with numbers may help (unless i’m not understanding correctly).
The portfolio driven exit rule when a stock falls back from being a 3R trade to ~2.6R is a hard exit. Imagine you risk 1.5% of account balance on a trade and this translates to 6% on the stock level. If you are up 3×6%=18% it is a 3R trade. Here I try to scale-out some or I even plan the trade in advance in a way so that logical resistance levels such as PLLs, clotheslines or pivot lines ar around 3R and thus would trigger logical scale-outs around that level.
Once the trade drops back from being up 18% to just 2.6R which equaly 15% I exit. This allows me to secure a solid 3R win but removes the chance to add any icing on the cake so to say.
With well timed scale-outs this drop from 3R to 2.6R would require the stock to drop a lot as the position size is smaller now. Timing those scale-outs is working very well with the PLL technique.
This is my basic trading system in a nutshell.
Once a trade is up 3R I hold it until it flashes a clear red flag, hits a very logical resistance level or drops back below 2.6R.