Adding to Winning Positions

This is my first post on FPA. I'm also relatively new to trading, with exposure to demo and micro live trading for a little less than a year.

I've heard of adding to winning positions. This seems to me like something that would only work well in swing trades or longer term trades.

Does anybody think you should do this with day trading?

 

Free to choose

You are right about the longer term trading style when added to positions. I day trade and never trade this way. I am usually out by 9 Am (i am on PST) and close open trades before swap rate hits me. Unless the trade is way in profit. I always close ALL open trades on friday by 9 AM. I think its more HOW you trade that determines how much risk u can swallow.

 

Definently keep away from it when day trading. Its commonly known as 'pyramiding'. A better desciption might be 'house of cards'. Great when it goes your way but of course the issue arrises when the market goes against you & you end up being over leveraged against your initial account value. Personally I'm to risk adverse for it, but if you must at least use a trailling stop so you don't get left holding more than you can handle if it goes wrong for you & at least have some profit.

 

You can do it if you like, but just be careful.

Let's say you've got 1 minilot open on a pair. Things have gone very well and you've got 50 pips profit locked in with a stoploss. Opening a 2nd minilot with a 50 pip stoploss would mean that you are risking 100% of your profit in order to hopefully make more money. That's probably not a good idea whether you are trading long term or not.

If you want to add, risk a reasonable percentage of your locked in profits, not your current profits. In the example above, if you really needed a 50 pip stoploss, then the 2nd trade should be for some fraction of a minilot. It's up to you to determine what percentage of your locked in profits you want to risk. Personally, I never risk more than 50%, so in that scenario, My second position would be 5 microlots or less. Another thing to consider if you've opened a 2nd, smaller position would be to move the SL to breakeven more aggressively. This increases the chances of getting stopped out on the second part of the trade, but also does a better job defending existing profits.

If you have a broker that likes to slip you on your stoplosses, take this into account when determining how much profit you really have locked in. (also, consider changing brokers). Using this method, even if the market reverses and slams straight into the stoploss on both trades, you've still got something to show for your time and effort.

 

Even if you get this profit, you will risk it when open new trade... right?
So above case is much better, because you found profit way...

Don't listen anybody tells you close with small profit - it's way to loose...
If you have profit - risk them on 100% and you'll get much more... Or it's may be your last profit... You must trade so that broker will dreaming about you to close trades and free his money... Then he will call you as call me and ask to close for NEXT .25 points discount...

One BIG secret - to withdrow profit no need to close positions at ALL!
Good Luck

 

to be honest i'm not really a fan of adding to positions.

fixed stop, fixed tp. end of.

 

It's a matter of trading styles and time frames. If I'm trading weekly charts trying to ride a loooong trend, I can't place the full trade at once without blowing my risk management rules. Instead, I go in at very low risk and scale in.

For very short term trades, it's all in, all out, no scale-in, scale-out.

 

I shouldn't say this, but one thing I've been doing that's been helping a lot (since I usually trade off spastically short time frames) is to enter, and then if things are really not going my way, take a look at an hourly chart (for example). If it still seems to follow the trend, I add to my losing position with the thinking that 'hey, this is a better bargain than my original position.'
Once it's obviously going to disregard the longer term resistance level, I bail on both positions, but at least if you have a ½ retrace of the distance between the original entry and the new position, you can bail out without a loss.

I've seen Pharaoh say that he's learned not to do this, but it works some times.

 

I call that "buying at a discount".

Generally, it's not a good idea, but if done VERY judiciously, it can work.