{"id":418138,"date":"2021-10-15T12:39:00","date_gmt":"2021-10-15T10:39:00","guid":{"rendered":"https:\/\/ftmo.com\/?p=418138"},"modified":"2025-03-04T10:09:17","modified_gmt":"2025-03-04T09:09:17","slug":"adding-to-a-losing-position-a-risk-that-can-pay-off","status":"publish","type":"post","link":"https:\/\/ftmo.com\/en\/adding-to-a-losing-position-a-risk-that-can-pay-off\/","title":{"rendered":"Adding to a losing position? A risk that can pay off"},"content":{"rendered":"
One of the basic rules of trading states that a trader should never increase his\/her positions when he\/she is at a loss. However, some traders still use this method of position management while still remaining successful. How to do it properly without causing too much damage? We will explore that in this article.<\/em><\/p>\n In our last article, we wrote about pyramiding<\/a>, an approach where a trader can effectively increase the position profit potential by increasing his\/her position without having to take on more risk. Today, we’ll talk about the second method of increasing positions called scaling in, where a trader increases his\/her positions while being at loss during the course of a trade.<\/p>\n At the outset, it is important to note that this is not at all recommended for inexperienced traders. Many traders will find this approach, as in the previous case, illogical. However, there are those who are unable to reconcile with closing the losing positions and, believing in a turnaround, try to make up for their losses by increasing their positions. However, when this action is not carried out in a planned manner and with a predetermined risk, it is doomed to failure.<\/p>\n The trader must know in advance where he will enter the market and how large his positions will be. This approach takes into account that the first entry into a trade may not be ideal. Increasing the position allows the trader to enter the market in an even better position and average the situation in his favour. The stop loss on the first position is only a fraction of the amount the trader is willing to risk on that trade. While this reduces his potential profit on the trade if the market moves in the right direction from the start, it primarily reduces the potential risk.<\/p>\n Psychologically, it is also interesting for the trader that a move in the wrong direction after opening the first position is no longer a stressful situation for him as he is already counting on it and interestingly, it rather represents another opportunity for an even better entry. This can be especially useful for traders who suffer from FOMO and open positions prematurely. Thus, the first, potentially prematurely opened position may not necessarily be a problem, which can have a positive effect on the trader’s psyche.<\/p>\n There are several methods of entry when opening positions in this way. A trader can speculate on a trend reversal using various support and resistance levels. Scaling in can also be used when opening positions in a certain range within which new levels of support and resistance etc. can be formed.<\/p>\n<\/a><\/p>\n
A clear plan is essential<\/h2>\n
Dealing with FOMO<\/h2>\n