Good traders don’t go all-in at once.
They build positions in phases and scale out when the tide shifts.
Here’s a system that works with your AI’s 5, 10, and 20-day forecasts.
1. Why Layer Trades?
- Reduces risk — you’re not “all in” on a single moment
- Let signals prove themselves — reward the AI when it’s right
- Adapt to shifting strength — AI might upgrade/downgrade confidence
2. Layering In — When to Add to a Winning Position
📈 Rule: Add only when signal stays strong or upgrades
Example:
- Day 0: 20-day prediction = +12%, confidence = 80% → Buy 50% size
- Day 5: Stock rises 4%, confidence upgrades → Add another 30%
- Day 10: Stock pulls back to support, still strong → Add final 20%
📏 Position Size Plan
| Time | Signal | Action | Position % |
|---|---|---|---|
| Day 0 | Strong 20-day | Starter entry | 50% |
| Day 5 | Still strong | Add on breakout | +30% |
| Day 10 | Dips to support, still strong | Add last 20% | +20% |
| TOTAL | 100% |
3. Layering Out — When to Take Profits Gradually
💡 Rule: Trim as signals weaken, timeframe ends, or target nears
Example:
- Day 0: NVDA bought at $850, 20-day prediction to $950
- Day 15: Hits $920, confidence drops → Sell 50%
- Day 18: Price stalls near $940 → Sell 25%
- Day 20: AI signals no longer bullish → Sell final 25%
📏 Exit Plan
| Price Target | Signal Change | Action | Position Remaining |
|---|---|---|---|
| $920 | Confidence drops | Trim 50% | 50% left |
| $940 | Price stalls | Trim 25% | 25% left |
| Day 20 | Signal ends | Exit fully | 0% left |
4. What If Signals Contradict Each Other?
Let’s say:
- 20-day = Bullish
- 5-day = Bearish
🧠 Play both sides smartly:
- Keep long-term position from 20-day active
- Use small short-term hedge (e.g. buy puts or sell call spreads)
- Don’t panic sell — wait for the longer timeframe to confirm shift
If all timeframes flip → Reverse or exit fully
5. Layering Rules of Thumb
✅ Add to winning trades when:
- Confidence increases
- Price confirms
- Volume expands on breakouts
❌ Do NOT add when:
- Price goes against you
- Signal weakens
- You’re emotionally biased
6. Advanced Pro Move: Use AI Signal Strength as “Risk Budget”
Let confidence level tell you how much to commit:
| Signal Strength | Max Trade Size (%) |
|---|---|
| Weak (<60%) | 0% (no trade) |
| Moderate (~70%) | Up to 3% |
| Strong (80%+) | Up to 7–10% |
Layer in using this cap. For example:
- Buy 3% now, hold 2% in reserve for add-on.
Final Word:
AI is dynamic. So your strategy should be too. Layering lets you ride the wave instead of chasing it.