Why do so many traders enter multiple positions on the same pair with the same lot size versus summing the lot size and enter one or two trades?
Example:
All these are entered at the same time.
AUDUSD sell 0.01
AUDUSD sell 0.01
AUDUSD sell 0.01
AUDUSD sell 0.01
AUDUSD sell 0.01
AUDUSD sell 0.01
Why not just enter one sell position at 0.06?
I understand placing two trades at the same lot size. One to hit your TP and one to continue running.
Some do it so they can take profits at certain levels. For example if your buying and hit some resistance then you could take profit on one or a few positions, then make the others safe and let them ride for either more profit or break even etc etc
Depending on the setup, i’ll stack 2 orders (sometimes 3) within a zone. Usually the 2nd order is twice the size of the 1st order and placed aprox halfway between the 1st order and my sl.
This is considered averaging down by most traders and thus not usually recommended but in my system its a risk reduction strategy.
On your last point re: averaging down.
It’s not necessarily the taboo that it’s made out to be depending on your reasons or intent for doing so.
My core trading system is profitable overall mainly as a result of this. In my case it’s called scaling in to a (full size) position on a trade. Some would argue that it’s the same thing and purely semantic. But there is a subtle but fundamental difference. My total final position size and risk is known before the trade is taken. So assuming a full size position is 10 contracts for example: I would be scaling in as 1+2+3+4=10. But the risk on the full sized position of 10 is calculated beforehand (in my case always 5%).
What I’m saying is that no matter how your refer to it: it’s fine as long as theTOTAL risk on ALL of the positions that make up the trade doesn’t exceed your risk percentage on the trade if you are required to close at a loss or if stopped out.
Where it becomes a problem especially for new traders and pseudo gamblers is when it’s done with the express intention of attempting to better the average price on a bad trade just to hopefully be able to break even on the trade or reduce the, by that stage, huge loss on the table. By that stage the trader is probably well past any reasonable or acceptable risk level and for the most part a margin call becomes their stop.
So with reference to the OP’s post then: if for whatever reason multiple positions have been opened on the same instrument as shown then no problem just as long as each are not treated as separate trades each risking 5% or whatever. If this is not adhered to then it’s obvious that in the OPs example the risk would be 30% as opposed to 5% for example.
To add though:
Why one would have those six positions open as opposed to only two: no idea UNLESS some refer to one particular trading system or methodology while others refer to another. I do this day in and day out. I trade two totally different and independent trading systems on any given day so sometimes I’ll have multiple positions open on the same instrument but the trades are handled independently according to the two different trading systems.
Ooooo. The idea of scaling out of positions has always puzzled me but now I understand completely. Lucky to see this.
agree also good example
Honestly, I also dont understand quite well this sort of trading. I would like to hear experiences from traders who actually did it. How do you choose when to close your position if you have six same open? What happens when market turns against your open position?
Well. If you had six of the same open then it would be prudent to scale out of the entire position by closing out one or two positions at certain intervals as the trade moved in your favor until you were completely out. By doing this and if the trade did turn against your initial position at some point then potential losses would be minimized.
But based on the question I make the assumption that you didn’t read the entire thread so I shall repeat myself for want of something better to do this afternoon:
If the market turns against your open position (your words) then you should only lose no more than your allocated risk percentage (be 1%, 2%, 5%, whatever your poison). In other words and as was clearly stated in a previous post on this thread: does not matter HOW many open positions you may have on the same instrument at the same time just as long as your TOTAL risk on ALL of those positions does not exceed your allocated risk percentage if stopped out (there is an exception to this but I’ve already detailed this and not going to repeat here now).
I am fully aware that majority of the traders on social media are basically liers, but also i am seeing this from people on this forum, and other legitimate forum discussions on the web.
If you have predetermined your risk per trade, your stop loss is set, entry set, you are risking a certain amount of pips, and your predeterminer risk of (let’s say) 2% per trade is being met.
You enter the trade, and start going in to profits. All good so far, good job.
1.Why would you double or triple your risk by opening multiple positions on the same pair?
Maybe it’s some weird scalping technique…i don’t know.
p.s: i am not talking about scaling in, that’s a completely different ball game, and is legit from a money/risk management perspective.