Some people think that they should add onto a losing position, as they feel like they are getting a discount on their position. I personally believe this totally wrong and if you should add to a position, that is a position which is already winning, not losing.
I don’t add to a losing position as I always enter at my maximum position size. If I added to the loser, I would immediately be accepting risk beyond the maximum risk exposure that my strategy rules permit.
Just remember that the only way to lose this game is to get knocked out of it.
Depends on your strategy. My highest win rate strategy involves not closing the first position you open and cost averaging but with a few added techniques that I’ll post here one day when I have time. Even entering at the exact wrong time makes a profit overall. It is still possible to lose if you size positions wrong, but with the right experience and knowledge I’ve not lost anything yet.
But it’s based on price action and I don’t start near news very unlikely to get in at the exact wrong time.
A CEO of a CFD broker was asked this question: Do people make good traders?
His response: Yes and No.
Yes - they can make more winning trades than losing ones
No - they run their losing trades longer, and add to losing positions.
tradertom.com is on record that he would never add to losing trades, but he would add to winning ones.
Which all takes us to to when would we add to an open pos1tion and how?
I like to start adding when the profit reaches the same amount as the risk. At that point, move the SL to the entry price and immediately add a new position of equivalent size and same SL amount. Now I have doubled exposure to further price movements but the risk of capital loss is not increased, and I can keep doing this until the trend ends. The downside of this is that the risk of a losing trade in the early stages is increased and the loss of unrealised profit grows with each new position.
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Adding to a losing position does not work and is basically Martingale which has already been proven to fail, however adding to a winning position also fails, however mostly destroying profits instead of capital with Martingale.
The correct answer is you place your trade with exact position size at the exact point of entry, if you need a confidence boost you half the unit size, the markets respond to confidence, Martingale is doubt, adding to unit size is greed, rarely do either have a happy ending in the markets.
If position was initially small and you assumed that you’d use price decline as discount then you can add risk, it is perfectly ok. It is called ladder trading and many traders use that.
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Absolutely agree with you there! Adding to a winning position can indeed be a smart move to capitalize on momentum. But piling onto a losing position in hopes of a discount?
in different phase of learning ,you’ll add on to both positions ,
adding to winner maximize your profit ,but greatly reduce your winning rate ,even make winners into losers.
in other hand ,adding to loser will blow your account eventually ? yes and no ,but if you push everything hard enough to the limit ,risk will naturally dissolve and disappear ,and you will get the answer you always wanted.