Hongli's "Enlightened Trading Life" series content

How to add to a position? Where should I add to a position? How should I manage my position when adding to it?

When should I add to a position?

Remember this phrase of mine: Never add to a position when you are at a loss, never add to a position when you are at a loss, never add to a position when you are at a loss. You must not think like you do when trading stocks, saying that when the price drops, I will average down my position. If you can't average up, it will suddenly drop, and then what will you do?

Therefore, adding to a position when you are at a loss is a major taboo in adding to a position. In a zero-sum market, you must add to a position when you are in profit, and it should be after the profits start to run and at key levels.

How to add to a position?

Let me explain some basic knowledge points to you, for example, if you have taken a short position near the trend line in the chart.

Where is the position to add to? After breaking through the support level, you can add to your position here. Where should you place your stop loss? Your stop loss can be raised from the previous level to this one.

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What does this mean? It means that if both positions are taken out at the same time, you will not lose money. Each position you add to should be a new entry point, not a random addition.

"I think I should maximize my profits, I think my profit is too small, I only made this much from one position, if I had taken a double position at the time, I could have made more points."However, in the market, the greater your risk, the greater your profit must be. Conversely, the greater your profit, the greater your risk is as well. Therefore, if we want to maximize our profits while avoiding risks, we must allow our first position to run with ample profit, so that we can ensure no losses.

Thus, adding to a position is the most important aspect of the entire mindset of opening a position. When adding to a position, your mindset must be good first. You need to understand that the trend has not changed, you need to know that it has broken through a key price level, and you also know that its entry point is where I would enter a new position as well.

When adding to a position, it also requires multiple models and many conditions. I only feel that if I don't have a position at the top, I should also open a position here.

After adding to the position, if it continues to break through, should I add again? Yes. Because it has broken through another key price level, it has broken the previous low, and it has created a lower low.

What about the stop loss? The stop loss for two positions can be placed together. That is, after being knocked out, your first position is definitely profitable, the second position still has a slight profit, and the second and third positions are at the same level.

Should I add more? My suggestion is not to. Why?

You can add up to three to four positions for the entire trend, and you can't add more. Moreover, the logic of adding to a position must be that the more you add, the less you add. My teacher's original method of teaching me was the pyramid position addition, which means you start with one hand, and when adding to the position, you add 0.5 hands, and when adding again, you can add 0.25 hands.

What does this mean? In this way, your break-even stop loss can be set higher.

As for me, when I was more aggressive at the beginning, I did 1 hand plus 1 hand, because it is parallel position addition, but this method is actually very dangerous. So the proportion of strengthening is determined by your capital and your personal tolerance.

For example, if you do 1 plus 1 plus 1, you now have 1 hand. If it suddenly gives back, that is, 3 hands, 3 times the capital is losing, not the capital of one single position, and your floating profit will be largely given back.At this point, it's a strong psychological impact on you. Not only will you be unable to hold on, but you will also be extremely nervous, which will affect your subsequent trades.

So, what proportion do I suggest for increasing your position? Like my teacher's approach to increasing the position, it is quite conservative. I suggest increasing the position by 60% to 70%. If you initially took one contract, when you increase the position, you can add 0.6 contracts, and then later you can add another 0.4 contracts. Gradually decrease like this, adding 3 to 4 positions should be enough.

If things are going smoothly, you can place all your stop losses here. If there are further new lows, place them here as well. The further you go, the closer to the end of the trend, you might say, "Teacher, I don't know what the end of the trend is." But you must know how much profit you have, right? The profit from these trades has already been very substantial, hasn't it?

If you want to get more profit, move your stop loss to break even or a bit further, or you might think, "I've already taken so much, can I close my position?" Of course, you can. But you don't know where it will go later.

Now that the market has finished, we know this is the bottom. But what if the market hasn't finished? If there hadn't been a black swan event, it could have continued to go down, and you might have missed out on hundreds of points of profit. So, a stop loss at break even can satisfy our greed.

But you say you want to keep more of your profits, OK, you can close the second and third positions and keep a base position. This is a matter of personal trading system, and I won't go into too much detail here.

That's the end of the discussion on opening positions. Welcome everyone to follow, like, and share!