Little things big results

Often it's small things that can have large effects on our bottom line. Here is an example which uses a trade I'm currently in. I shorted AAPL earlier this morning and stopped out, later it gave another entry and so I am now short AAPL again, this time from $86.80. My risk is $1.25 on this trade, and I see a strong area of support at $85 per share and then again around $80.00 per share. This type of setup has about a 50% chance (slightly less) of being profitable, but given the very favorable reward potential versus the risk potential this is a trade I would take all day long. My plan will be to take 25% of the gain off the table when/if AAPL reaches $85 per share, at that point I will adjust my stop out point to breakeven or better. The balance of the trade I will be taking off if it hits $80.00 per share. Lets look at how taking off some shares at $85 effects my outcome. I'm going to take 25% off if it hits that point. Assuming that the trade works out and goes to $80.00 I will make an average profit of $5.55 per share, or about 4 1/4 times more then my initial risk. Let's assume though that instead of taking off 25% at $85 my plan is to take 50% off. At that point making all of the same assumptions my average gain on the trade is reduced to $4.25 at closing, or about 3 1/4 times my initial risk. Still not bad, but not nearly as good.
The point of this post is not a discussion of "partialing", which is a subject half a book could be written about. It's not to suggest that you should take 1/2, 1/4, 1/3 or none off at these partialing areas, but simply to make you aware of the very real effect on your bottom line the choice you make has. Too many people do this randomly and decide in the heat of the moment how much to take off, this should not be done. Know in advance what your going to do.