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I have a very good model for directional trading. It gives me highly accurate predictions for short periods with predefined length (10 bars ahead; hourly timeframe). When I enter the trade I wait 10 hours and then close my position. As we all know price fluctuations can be very large while the trade is open, so closing trade (after 10 hours) is not always an optimal solution.

I need some framework to optimize my exit. I mean, if the price is at its peak I would like to close a buy position (before 10 hours elapse), and when the price is in the lowest low I would like to close a sell position (also before 10 hours period). If the price doesn't reach any of supremum or infinum values i would like to manage the trade till the deadline (10 hours).

How to model expected values of price supremum and infinum when dealing with near martingale price process? How do you optimize take profit levels? Is this strategy realy usefull in real trading (in terms of profitability)?

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  • $\begingroup$ When you trade it is very common to have doubts ("maybe I should get out now?!?"). These "intuitions" are counterproductive and should be ignored in the absence of statistical evidence of their validity. In most cases the path of the trade over the 10 hour horizon is largely random and unless you have stat significant evidence otherwise you should stick with every trade until the end, IMO. $\endgroup$
    – nbbo2
    Feb 23 at 8:46

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