Trading Forex Requires Caution: Adding Positions Along the Trend

Profiting in forex margin trading inevitably requires advanced strategies, and "adding positions along the trend" is one of them. However, this is difficult to execute—poor position additions can amplify losses! Today, we’ll analyze where, how much, and how to add positions effectively.

1. Conditions for Adding Positions Along the Trend:

1. A trend must be established—How to confirm? Use your trading system (e.g., moving averages).

2. A strong trend consistently makes new highs/lows without sharp reversals—Eliminate choppy markets! Verify with trendlines or MAs.

3. Momentum indicators (e.g., ADX, RSI) should show strong or newly emerging momentum.

2. Optimal Positions to Add:

1. Breakout Addition: Effective during acceleration—add at new highs. But false breakouts may trap positions.

2. Pullback Addition: More stable, but many traders misjudge pullback depths, missing opportunities.

3. Key Rule: Regardless of method, the trend must be confirmed. A "bad" entry today may become a great one tomorrow in a strong trend. Thus, position timing matters less than risk management!

3. How Much to Add? Flexible Capital Management

The iron rule: Never risk more than 5% of capital. How to enforce this when adding positions? Precise calculations!

Example: $4,000 account, 1:100 leverage.

• First entry: 5% ($20,000 position). Price moves 200 pips, retraces 100 pips—now considering adding.

• Regardless of stop-loss adjustments or added size, total risk across all positions must stay ≤5%!

Key Checks:

1. Original position’s profit status

2. Adjusted stop-loss? Recalculate risk if modified.

3. Added position’s size

4. Added position’s stop-loss

Sum all risks to ensure they total ≤5%!

These are foundational principles. Test them yourself while controlling risk and emotions. Discipline prevents major losses and can yield doubled profits in strong trends!