FX-Men Zombie Assassin
Master Contributor and Member
I do find it is better to start position with more than one unit. It gives a better probability of locking in profits and create risk free trades than using stop loss limit orders.
If you are trading 10K lots and you can't trade more than one at a time, may i suggest trading micro lots(1k units). Trading smaller unit sizes also gives you the benefit of taking the pressure of profits off your shoulders and lets you focus more on trading correctly.
Oh there is definitely alot of flexibility when trading multiple lots. You can scale into a position, scale out of a position, and take profits at different levels. It's really quite nice. Definitely more flexibility than just 1 lot.
BUT you have to be very well capitalized in order to trade with multiple lots. Micro lots work good because each pip is only worth a penny but you can trade more lots. Just make sure you have enough money in your account to justify doing it.
Orecal, could you explain what scaling into/out of a position means?
Scaling in a position just means that you don't open up your full position at one level. For example if you are noticing a pair thats overbought and want to sell you could scale in your entry because it's difficult to find the exact top or bottom of a trend. So you could short at the market price and if the price continues to move up, you could add to your position. If the price goes up again, you could add even more to your position until you reach your total desired position amount. Since the market will be overbought for an extend period at this point the price should eventually start to go down and you are now in a winning position.
Scaling out is similar but applies to your exits.
It's a very detailed method and I've only scratched the surface. There is a book by Boris Schlossberg called "Technical Analysis Trading". He has a section in there that it explains it better. I recommend reading that book. It's pretty good.
Orecal, one more quick question. So scaling in means you add to your position when the price is moving against you, in hopes of a better average position when it swings your way. When you scale out, are you exiting as your profits are increasing or decreasing?