Adding Lots

I was just curious if there are any strategies for adding lots during a trend. There are some stratgies that require me to trade 2 lots at a signal, and take one out for profit at a certain level and let the other one ride. However, sometimes I find this risky as the trade sometimes does not go my way. I would therefore like to know if there is a technique that I can implement whereby I can add lots to my position once the market is going my way. This approach seems a little less risky to me as I do not need to layout so much at the start of a signal/oppurtunity.

thanks.

I'm currently trying to solve that question too. I believe scaling in is beneficial, especially for trend trading, like I'm trying to do, but I don't know how to go about doing it. I will think about it though, and hopefully someone else will post their strategy in the meantime.

andersenws

hilmy83 does that in his system. Maybe he can ans yr question..

The easiest way I know to add lots is that once you're in a trade AND you have moved your risk (stop) to breakeven, drop down a time frame or two and use your same system to find additional entries that are consistent in direction with your original trade.

Food for thought.

http://www.investopedia.com/articles.../ScalingUp.asp

Hmm...pretty good article. Clearly it seems that it makes sense to add to a position once you have profited enough from the first position to clear the entry stop of a second position. I will look into it more. Right now I am trading off of a 4h chart and so I try and trade the trends and the extensions. With that in mind, when a long extension comes around, you can make some serious profit but there needs to be a very good plan in place.

adding to a position (we shall assume it to be long) is commonly referred to as "averaging up" and is most common in swing or position trades where it becomes obvious that an uptrend is going to continue. During ANY move up there will be pauses and retracements (usually at points of resistance where sellers lower the price by creating more supply) and one buys at the lows of these retracements to add to their position ("buying on the dips")

a very standard and well used method of adding to your position at the cheapest prices possilbe.

of course, one must be able to tell how far something is going to move !

enjoy and trade well

mp

Buy on the completion of ABC dips...sell on the completion of ABC rallies.

Keep in mind that by doing this (averaging up) you in effect build an upside down pyramid which will leave you susceptible to any retracement against your position direction having LARGE effects on your equity.

[quote=BookerT;253178]Keep in mind that by doing this (averaging up) you in effect build an upside down pyramid which will leave you susceptible to any retracement against your position direction having LARGE effects on your equity.[/quote

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Forex is a support and resistance driven market (altered for a moment in time by news, but invariably returning to its original trend) and as such SHOULD NOT BE APPROACHED IF YOU DO NOT HAVE THAT SIMPLE KNOWLEDGE, be it intraday or longer term !

without that knowledge, HOW can you tell when youve reached a buy or sell point ? Well, there are the fibs, the ganns and a lot of chicken bones and mumbo jumbo, but I sincerely doubt that the bankers at any of the major institutions are using them (well, ill go with the fibs for retracements anyway as gann theory is more art than science and what is "C" to one person is "A" to another !) Yes, there are "systems" that are in use to protect a person who has NO knowledge of technical analysis (hard for me to accept these people as "traders" as they simply let some EA do what they should have learned before putting their money on the line)

but there are a few things that every banker is using -- prior highs, prior lows, pivot points (VERY important ) and the simplest of all things, the linear regression channel.

take a look at any pair, draw your LRC's and WOW -- the currency bounces off the bottom and goes to the top and then reverses, starting the whole trip all over again !

backtest, frontest or do anything you wish --- this is a simple and universal truth in the Forex market and if the LRC is VIOLATED to the upside, then youve got the old fashioned "breakout" (the term "breakout" HAS to refer to breaking out of "something".)

That "something" is the LRC !

you can be foolish, attempt to re-invent the wheel, but youll not find a simpler (which is why the banks use it) method of seeing where tops and bottoms lie in the scheme of things !

and to finish my mini-rant, INDICATORS will show you tops and bottoms of moves also --- hard to trade if you dont know what they do, so you best learn them ! Trading is NOT a simple pursuit, or most of you would be millionaires by now --- but the stunning truth is most of you will be gone in less than a year (often WAY less !) and its because you wanted something for nothing and werent willing to learn HOW to trade !

enjoy and trade well

mp

I have heard that when the RSI crosses the 50 enter the trade in that direction. When it crosses 60/40 add to the position. When it crosses 70 add to the position agian. When it comes back to 70 exit the whole position. Does this work? I have no clue.

When you add, you shouldn't add more than 50% of the existing open position. This prevents what you've brought up.

First position = 2 lots
Second = 1 lot
Third = .5 lot

adding lots is what i do! and i believe that it is an essential part of being a TREND trader.

This is how i do it.

First you have to mark off your s/r. If you're going long, then mark of the next resistance on your chart, then the next higher resistance, then the next, and so on. Going from right to left
I guess the challenge is what constitute an s/r? I trade on the daily, so in case of long, i mark off the next high (horizontal line), and move on the the next HIGHER high. I do this until I get a good 3-4 resistances, keeping the current price below my resistances. My chart consist of two things; 10 day range (to determine ideal s/l when position are initiated) and bunch of horizontal lines.

Now when do i add? It has to be at the right place and time (i trade on the daily by the way). So I just wait for the CLOSE of the day to be BEYOND the resistance. If the close is 1.2000 and the resistance is also at 1.2000, then it's not a place for me to add position.
Another important thing is to calculate whether or not it would be PROFITABLE to add.

So when I enter into a position for the first time, I always use 2% position (thereafter, I use 1% for added positions). I move my s/l as position go my way and to lock in profits. Then when the price close beyond a resistance, I move my s/l and check how much $ I have locked in. I don't bother with looking at pips since they're useles. You have to make sure that you new position with the new s/l doesn't eradicate your locked $ profit from previous position. Meaning that when you calculate your lots on the new position based on the new s/l, the $ value of the new position is not bigger thant the gains you made so far. If it does, DO NOT ADD IT. If it doesn't ADD it!. So basically you have positions that might reduce your gains a little but NEVER TURNS A WINNER INTO LOSER. Essentially, in a good trend, you will see that each position added is getting smaller and smaller.

So adding postions is the best way to take advantage of those trends since they don't happen too often. And making sure that added positions are done the right way ensures taht your losses are FURTHER minimized (in addition to money management) and make a super killing during trends. Even in medium size trends it's easy to make 200-300 pips, but again, pips doesnt measure how much you gain