Abstract： Scaling into a trending move is a fantastic transaction modification to increase your maximum profit. We can't all be like DJ Khaled, who wins every time, so there are guidelines you should follow to ensure that you add value to your open positions.
It's now time to have fun. A great transaction modification to increase your profit is scaling into a trending move.
We can't all be as successful as DJ Khaled, but there are guidelines that you can follow to ensure that you add value to your open positions.
Let's go over those regulations, unless you're DJ Khaled.
These rules will help you increase your chances of winning.
Plan ahead for level entrances to new units.
Calculate the risk of adding additional units.
A trailing stop loss is a way to maintain a rising position while limiting your risk.
An Example of a Trade
Let's take a look at an example trade to better understand the strategy.
Tom, the “trend trader,” is closely monitoring EUR/USD and believes that traders will drive it higher after a period. He suggests buying euros at 1.2700 USD instead.
He first notices that the recent consolidation has not traded below 1.2650. So he set his stop loss at just below that level, at 1.2600.
Tom believes that 1.3000 represents a psychologically significant resistance level and would make a good location to collect profits in the event of a rally.
His risk-to reward ratio is 1:13 with a 100-pip stop and a 300-pip profit objective. It's amazing, isn't it？
He trades with 2% of his funds, but he is so confident in the trade that he takes that he will increase his stake if the market favors him.
He decides to add 100 units for every 100 pip and increase his stop by 100 pip. He decides to take a 1% risk in order to increase the number of units.
Tom's initial risk is $100 ($10,000 x 0.01) with a $10,000 account balance.
He estimated his initial position size at 10,000 units. Position sizes can be calculated using our position size calculator. He would add 10,000 units for every 100 pips and trail his stop for every 100 pips.
Let's look at the changes in risk-to-reward with each addition.
This simple example shows how to add to winning positions while staying safe and how it can maximize earnings.
Before you rush to grab every winning position, remember that not all markets are the same.
It is easier to scale into profitable positions in trending markets and big intraday moves.
Your average opening price will rise as your position gains in your favor.
This means that even if the market moves against your trade after you have added, it wont need to move nearly as far to place it in the red.
Scaling up to achieve success in range-bound markets and periods of low liquidity can expose you to frequent stops.
Finally, by increasing the position, you are reducing any margin.
This takes away margin that could be used to make other deals. It's there!
Scaling In and Out of Trades in Context
These champions have one thing in common: they not only work their butts off, but they also enjoy what they do.
"Patience is the key to everything," American comic Arnold H. Glasgow once quipped. The chicken is gotten by hatching the egg rather than crushing it."
Ask any Wall Street quant (the highly nerdy math and physics PhDs who build complicated algorithmic trading techniques) why there isn't a "holy grail" indicator, approach, or system that generates revenues on a regular basis.
We've designed the School of WikiFX as simple and enjoyable as possible to help you learn and comprehend the fundamental tools and best practices used by forex traders all over the world, but keep in mind that a tool or strategy is only as good as the person who uses it.