I don’t usually add on my position after placing a trade. I will try to let it ride to s/l or t/p without interference. One thing that I would like to develop is a good strategy for adding on my position. I know that this is a technique that many people utilize, so I would like to hear your thoughts on how/why you do it? Also, if you hedge your position, please explain how/why you do that as well.
Thanks in advance.
I like this question. ima sit here next to you and wait for some answers k?
This posted by Tymen1 in another thread:
Edit: Click on link at bottom of Tymens thread to check out what he is talking about.
Well I do this sometimes but in no way I’m experienced in this kind of techniques. Just what I have been able to incorporate to my trading.
Generally I don’t scale in or out my positions in the early stages. I haven’t seen a real benefit to the effort and the mental stress, and I explain why.
Some people tells you to add positions when your trade has gone negative for a few pips, that way you’ll enter at a better price and when price goes your way then your profit will be even better.
Well I don’t agree with this, because there’s no certainty that price is going to go in your way after all. If that’s the case then you are only adding to your losses, and that doesn’t make sense considering that at the very first time that you pull the trigger you have already calculated your maximum risk per trade.
There’s also some people that would avice you to scale your position out if it’s going negative, but I also don’t like this practice since you have to let price breath and many times drawdowns are part of the game before you can bank any profits.
I’m not against cutting losses. I do it myself but by oberving price behaviour. Since I trade reversals there are minimun conditions in price behaviour that once in a trade will tell me if price is actually going to retrace or if it’s going to continue its way. If price action is not favorable for me at some point then I can get out of the trade at a smaller loss than my initial 2%. I see no point at letting some lots open if I see price is not reacting the way I expect.
On the other hand adding positions once you’re in profit just with a preset ‘if it goes 30 pips then I’ll add one more lot’ doesn’t guarantee that price is going to keep going your way and you’ll have to let some room for your position to develop, so at the end you could end up at breakeven if the second position turns in a loss, which for my personal opinion is not worth the effort either.
BUT, there are exceptions. When I trade swings in the higher timeframes, I do look for continuation patterns in lower timeframes to add some more positions but with a minimal risk, that way if the pattern brakes against me it’ll eat just a minimum of my profits. But mostly I treat them as separate trades.
And in some cases I do scale out my positions while in profit. just to let profits run as much as possible, but I think that is the easy part and that was not part of the question I know.
Well it’s just my personal opinion, and I know many could disagree, that what I punctualize in that it’s my personal opinion.
To summarize this already long post;
I’d never add to a losing position under any circumstances.
I only add positions to and already positive trade when a new set up shows up in a lower timeframe.
Hope that helps.
Adding onto a position should be part of your trading strategy. You will need to define a clear set of rules of how and why you would add on a position though. In a sense you can think of it as a new trade, and as long as it fits your trade criteria, then it is a valid trade call.
Hedging is not a good idea, typically done because the trader over leveraged a trade and is about to get burned, so in a panick they throw a hedge trade on. I would never recommend hedging… use proper money management, and learn to accept loses. I heard at a seminar once to learn to “love” losing… it didnt make sense to me then, and I dont think I will ever love it, but I can accept it. Of course with US brokers, you can not hedge anyway.
After rereading hte post, adding onto a winning position should be part of your strategy.
as another mentiones, I wouldn’t add onto a losing trade.