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Chapter 36, Part II. Scaling In. Page 5

Discussion in 'Complete Trading Education- Forex Military School' started by Sive Morten, Dec 28, 2013.

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  1. Sive Morten

    Sive Morten Special Consultant to the FPA

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    Chart #3 | EUR/USD 30-min
    [​IMG]



    Pipruit:
    Our Entry #3 will be based at the same algorithm as Entry #2. Enter at 1.3286, stop should be placed above 1.3334 high, say at 1.3345. Lot approximately the same. Right?​

    Commander in Pips: Not quite. There are two possibilities exist, you may apply both of them depending on your experience and expectations. The major difference Entry #3 with Entry #2 will be that Entry #1 will be locked in profit, that you may use this to increasing lot at Entry #3 point, since your risk should be the same – $50 - or you may not. If the market will proceed lower your profit will increase significantly. The drawback of this approach is if the market will reverse here – your probability to end your trade with loss will be greater. Let’s explain it by calculations. First, we have to prepare the same calculation as with Entry #2 point.

    Pipruit: Ok. We move stop loss order as on 1st position as on 2nd on 1.3328 – breakeven on 2nd entry point.

    Third entry should be made from 1.3286, stop at 1.3345:

    $50/(1.3345-1.3286) = 0.08 lot. Hence, potential loss is $50, while profit is: 270+133+(1.3286-1.3195)*0.08 ~ 476. Oh, wait a minute. We do not have any risk here! Our locked profit on Entry#1 is (1.3365-1.3286) = $79! I think I’ve got about what you’re speaking. So, our 3 lots position is riskless here. Even more, we have another $29 to spend on adding more on Entry #3. We can add $29/(1.3345-1.3286) ~0.05 lot. So we can enter as much as 0.13 lot and still have riskless trade. Amazing!

    Commander in Pips: Right. You’ve done well. Now calculate how you can enter with Entry #3 still to remain risk the same – $50.

    Pipruit: This is simple. Since we’ve calculated that 0.08 lot gives us risk of $50 and our riskless position is 0.13, hence we can enter with 0.21 lot here.



     
    #1 Sive Morten, Dec 28, 2013
    Lasted edited by : Oct 14, 2016
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