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Trade
Limited averaging
On trade, using averaging, we talked about earlier. Now I would like to examine in more detail a special case of a technique of averaging, which still uses the foot on the transactions. This method is less dangerous to accounts in General, but may not be related to the type of trade, when losses are considered an unacceptable outcome of a trade. This method is rather suitable for those who previously traded with the limit of loss, and now decided to give the system some flexibility.
First and foremost, it is the traders who use trade levels appreciated the limited averaging. There are times in trading when there are two options most likely, for example, for price reversal. In this case, the speculator needs to put a stop according to his trading system. Limited averaging allows you to use 2-3-4 transactions, which are opened sequentially in the direction of opening the first deal. The main distinguishing feature of this method is the obligatory presence stops all transactions. This allows you to limit losses from operations, if still averaging did not help the situation.
The example of the limited averaging
Consider the example in Fig.1. The trader, being at the point 1, produces market analysis to open a trade. He drew attention to level 1 and decides to open a position for sell if the price reaches a selected value. After some time the price reaches the level 1 and is open on sale. Stop in the transaction is not established, but it is noted that if the situation on the market will not develop as expected, will open another order to sell at price level 2.Level 2 trader is considered very significant, and agreed that a more probable price reversal off that level.
Therefore, the speculator puts a stop the first transaction to level 3 and this price sets the stop for the second trade too. Unfortunately, the price reaches the level 3 and closed both trades at a loss. The loss from the second transaction is not too large that we can see on the chart, but at the same time, the second transaction was given a chance to get out of the situation without losses if the price turned and went up to level 4.
Consider a similar option that is different from the previous one, except that the foot did not work in the trades. In Fig.2 we see that was opened 2 trades, but the price did not reach level 3. After that, there was a change of trend and both positions were closed on average Take Profit (level 4). As a result, the erroneous opening of the first trade had no consequences for the account.
Thus, we see that it is possible to consider a limited averaging as part of a trade. It has a certain meaning when the probability of a price reversal in our direction big. Averaging the transaction can help in this case, it is likely to end the situation without loss. However, even if reversal does not happen, then losses for the second position would not be significant relative to the losses of the first transaction.
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| Category: Forex | Added by: (30.10.2017)
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| Views: 345
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