While I believe it is important to remain consistent with per trade risk; trade management must change according to market conditions. In fact, this could mean the difference between grinding out profits or drawing down your account.
In bull market conditions (SP500 generally above 200 day MA), my expectation for follow through on long trades is very high. So I would generally look to add if I get a valid second buy point and to let trades play out and exit on the break of a trend line (if obvious), break of 30 day SMA, break of pivot low or parabolic move up with my full starting position. And vice versa for short trades in a bear market.
Where as that aggression will likely be rewarded in a trending market; in the current markets one could end up with severe draw downs. So I have decided to combat this problem by looking to scale out of trades instead of exit all at once or even looking to add to trades.
My plan for longs and shorts in this market is to take 75% of the trade off at 3x risk and then exiting the remainder according to the rules I outlined above. This way I have more staying power for the few trades that end up going on to make significant moves and with winning trades the worst case scenario will be a profit of 2x risk [(0.75 x 3R - 0.25 x 1R) = 2R]. So if I can only manage to win on 3 in 10 trades during tough markets like we have now then I can still break even!
In none trending markets, defense is King not aggression!
Hope you find this useful.
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