Forex Position Scaling 3 - Increasing Damaged Positions
- 2023/2/25 6:27:25
- read: 5
The first scenario involves increasing your stop forextradingtime when a trade deviates from you, adding units to a damaged position is tricky. Doesnt make sense, does it? We say almost because if you increase a damaged position, the risk of the original position plus the risk of the new position is still within your risk-appropriate cashback forex, forextradingmarket it is OK to do so. The position size must be pre-calculated with the total risk of all positions within your risk appropriate level Lets look at a simple trading example to see how to do this: From the chart above, we can see that the pair moved down from forex trading session times.3200, after which the market consolidated slightly in the 1.2900 to 1.3000 area and continued to break down in the 1.2700 to 1.2800 area after bottoming out Suppose you think the pair will reverse to the downside, but you are not sure if you have found the right turning point. There are also several scenarios where you can enter the trade: short at the bottom of the consolidation area at the 1.2900 support to resistance level. 1.3000 above the area of consolidation, an important psychological level - a potential resistance level but if you wait and see if the market can hit 1.3000, you risk the market not going all the way up to that level, turning down and eventually missing the downside return to trend You can wait until the pair has tested the area of potential resistance and goes down below 1.2900 before entering This is a more conservative This is a more conservative way to trade because you can be sure that the sellers are in control of the market, but you miss the opportunity to enter at a better price level What to do? Why not enter at both 1.2900 and 1.3000? That would work, right? Of course it is! As long as you wrote all this down before the trade and followed the plan! Lets determine the stop loss level. For simplicitys sake, lets say we take 1.3100 as the signal level that shows you were wrong and the market will continue to move up. Assuming you have a $5,000 account, you are willing to risk 2% This means that risking $100 ($5,000 account balance x 0.02 risk) on this trade is appropriate for you Here is one way to set up the trade: short 2,500 units EUR/USD at 1.2900 According to our value per pip calculator, 2,500 units EUR/USD Implies a $0.25 per pip move value Since the stop loss is set at 1.3100, the position has a stop loss of 200 pips, which would result in a $50 loss if the stop loss is triggered ($0.25 per pip move value x stop loss (200 pips)) Short 5,000 units EUR/USD at 1.3000 According to the Value Per Pip calculator, 5,000 units EUR/USD implies a $0.50 per pip Change value of $0.50 Since the stop loss is set at 1.3100, the position has a stop loss of 100 pips and if the stop loss is triggered, it will result in a loss of $50 (change value per pip ($0.50) x stop loss (100 pips)) Combined, if the stop loss leaves the market, you have a loss of $100 Simple, right? We create a trade that we can enter at 1.2900, and even if the market continues to move up, causing damage to the position, we can enter from another position and safely stay in the normal risk environment in case you are wondering: two trades created a total of 7500 units long EUR/USD with an average price of 1.2966 and a stop loss of 134 pips If the market starts to move down after triggering these two positions triggered 1.2832, (1.2966 (average entry level) - 134 pips (stop loss)), then you will get a 1:1 return risk profit because, with your position opened at the better 1.3000 price level, EUR/USD wont have to go down too much from that resistance area to get a nice gain very well!!!