Disliked{quote} On post 8472, in case you are tad late and spot bull div to entry Long. Then, Price went 20 pips against you but you added one more Long position and average down the risk with total risk is still 2% of two Long trades and maybe keep adding more position and moving stop accordingly. So that makes me wonder because you used to said that NEVER ADDED TO A LOSING TRADE. Please give me some advice to dealing with special situation above.Ignored
We have determined a target price of X so we apply a risk level of half X. So we have a reward to risk level of 2 to 1. It is the appropriate lot sizes over these distances determining these percentages. For example, if we place $1 hoping to win $100, we risk half being $50. Once the market passes our $50 risk limit adding to it only increases our risk of losing a great deal more.
If we spot another entry and have not yet exceeded our risk adding another trade is not in my opinion adding to a losing trade. The target distance has increased so our lot size is less. They could be separated into two individual trades both with the same target but with differing stops but I prefer to average the stops to maintain the 2:1.
If my initial reward was set to gain 2% and my risk is thus 1%. Then adding another trade means I am aiming for an additional 2% (with a smaller lot size because the distances have changed) All Up I am now trying for 4% so my combined risk should not be more than 2%.
It is when we exceed the total risk that we should not add because we are in a losing situation.
Hope this makes sense.
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