TheRumpledOne wrote:
That is where I get "lost".
Are you saying you exited trade #1 with a profit?
Then your next trade you increase you lot size to include the trade #1 profit?
Then if you lose (stop out), you lose the trade #1 profit plus the initial trade #1 risk?
If this like letting it all ride at the craps table?
Let's divide 1% into 4 lines ('risk-box' = 4) to make things simple.
A 'line' is a fraction of the total risk (whatever is/was in the box): a line can be 10 pips or 20, 40, 80, etc, as long as the risk is 1/4 of whatever was/is in the box.
If you make 1 line then you have made .25% which is then divvied up between the 4 lines: all future gains are then (5/4)*.25 per line or +0.3125%...
.3125 * 4 = 1.25%.
How much profit is risked on the next trade depends on how many lines are used on the next trade: .25 / 4 = 0.0625% per line used.
If you lose 1 line (.3125%) then 3 lines remain & if you increase your lines to 4, by reducing your position size to 3/4, then you are making (3/4)*.3125% per line or 0.2343%: you are sitting with a small loss but had you succeeded you would be making 25% more money going forward and if you made 2 more lines after that then it would jump to (6/4)*31.25% or 46.875% increased profits (an extra 9.3 pips of profit per 20 pips).
In Craps you would have $100 and bet $100/4, $25, between numbers.
If you make $35 then you would divide $135/4, $30, between numbers
If you make $42 then you would divide $177/4, $40, between numbers.
If you lose $80 then you might divide $97/3, $30 between numbers.
If you lose $30 then you would divide $67/3, $20 between numbers.
If you make $28 then you would divide $95/3, $30, between numbers.
etc
What you don't do is risk the money set aside for one session (a risk-box) on a single shooter: you need to survive until lady luck shows up.
Just like in trading, you are limited by minimums and maximums; playing for higher stakes takes care of the first problem.