When are most Intraday Targets reached?
We get a lot of questions about setting Stop Loss. Since the probabilities are derived from the percentage of times each price condition has hit the target historically, and we see price move in a variety of patterns before hitting the target. Therefore we recommend that you follow the price condition from beginning to end and manage your risk based on many trades where your concentration risk is minimized. With more trades it is also more likely that current results will be similar to historical patterns.
Intraday Trading Insights
When it comes to intraday trading, we can provide additional analysis based on the frequency of Target Reached and the corresponding timeframes in which these alerts hit their targets.
For example, when we observe intraday targets reached across all percentage moves ranging from 0.2% to 1%, we find that about 89% of those successful alerts occur within the first hour of trading. Of the remaining 11% of successful targets that are reached after the first hour, 2 out of 3 of those (about 7% of all successful alerts) will occur before 1pm EST. Therefore, 93% of all targets reached on intraday alerts occur before 1pm EST. It was also notable that these percentages were consistent whether the move was 0.2% or 0.5% and above. In addition 3.5% of the alerts that were successful hit their targets at the last minute of trading.
Strategy Considerations to improve Risk/Reward
You can improve your risk/reward profile by closing your trades before 1pm EST or as early as 10:30 EST if they have not hit targets. If you decide to hold your trade beyond 1pm EST, then it makes sense to hold them through market close since about half of the 7% of the remaining successful alerts that will reach the target (approximately 3.5 %) within the last minute of trading.
Depending on whether you are trading options, stock or futures the holding period should also factor into your returns. For example, if you are trading options then given the nature of most of these Intraday conditions hitting the targets before 10:30 EST it may provide a better overall return to close soon after 10:30 if targets have not been reached. With Futures or Stock the holding periods can be longer.
With options you have Theta decay which refers to the reduction in the value of an options contract as it approaches its expiration date, reflecting the loss of time value. The rate of Theta decay will be highest with zero day options. You can minimize this decay by closing options early if the probability is low that price will hit the target after certain timeframes.
We hope that these insights can help you strategize and make informed decisions about when to set your stop loss based on time considerations for how long to hold your trades during intraday trading sessions.
By understanding these patterns and timeframes, you can better manage your trades and potentially improve your trading performance. In addition, consider managing your risk across many trades to minimize concentration risk and give yourself the best chance for the probabilities to play out as they have done historically.