Managing winning trades is an area that I would like to improve on and has been a major focus of mine lately.
I used the search button and was able to find lots of great info and advice on this subject, so please forgive me in advance if the question I have has been covered.
I've received some constructive criticism from a friend/fellow trader about my reluctance to add to a winning position.
A number of successful traders, including many experienced and well respected traders on this site recommend scaling in to winning positions as long as it is done correctly.
A common ex is as follows. Im also not taking spread into account for simplicity:
1) You go long 10 lots @ 1.500
2) stop loss @ 1.400
3) when price is @ 1.600, you add 10 lots to your position and move s/l to 1.500. You gain profit potential while keeping risk the same as it was at initial entry.
4) price moves to 1.700. You add another 10 lots and move s/l to 1.600. You incease profit potential and have created a risk free trade.
5) Repeat until you are able to lock in profit while continuing to improve potential upside.
I understand the logic, but this is my concern. When price hit 1.600, if you move your s/l to 1.500 w/o adding to your position, you create a risk free trade. You lose upside potential but minimize risk. I inderstand that if you enter an additional positon @ 1.6 and move your s/l to 1.5, you increase upside while keeping risk the same. However, the hardcore risk manager in me sees it as passing on an oppurtunity to minimize risk by moving your s/l to 1.5, w/o adding to your position. Even if you add 5 additional pips instead of 10 at 1.6, your risk is lower than initial risk, but you stil miss a chance to create a b/e situation
My priority when trading is to minimize risk. I am willing to sacrafice potential profit in exchange for lowering risk but I refuse to maximize potential profit if it increases risk.
Is my logic flawed, and if so how? Any advice or opinions would be appreciated.