kate682 wrote:Thanks MightyOne for explaining, I must be pretty stupid because I am even more confused now. From your explanation, I understand it as I could actually be in at 4 lots at the same price but the stop would be factored in closer. I trade the dow. Is this a two stage process, first to generate money to add to the stop, 2nd is the trade set up?
You are focused on buying. I froze the price so that you might see what you are actually doing.
Buying is simply the key that you turn to unlock the placement or movement of a stop.
Liquidation is the key that locks both your lot size and space for future use.
Every time you add you halve your space:
1) You start by entering with 2 lots + a stop at a strong extreme
2) you then "unlock" your stop from the extreme by doubling to 4 lots
3) finally you "unlock" your stop again by adding 50% & placing a TP a short distance away (as if you were scalping).
You are following the pattern of a short pillar (2-2 or 2-2-2)
so the totals look like 2-4 or 2-4-6 then you liquidate and re-enter with 4 or 6, your last size, and move along the pattern like 4-8-12 or 6-12-18
Sometimes we form the initial entry in two parts (1+1 then +2+2)
and that is why every unit is divisible by 2.
You lock your total space, from the current price to the stop, when you liquidate.
Place one end of the space at a strong extreme and re-enter for the same lot size when price moves to or within the space.
Space is money management in picture form.
There is no reason why space should confuse you, it is simply:
1) the lowest price you can short or highest price at which you can long
2) your total risk
3) the tool that you use visualize your next move
We either use a rectangle tool or a fibo with 0, 1, and .5
I hope that you will see that this is not an entry method, it is a stop placing and trailing method.
Positioning & trailing, positioning & trailing, that is all that we are doing.
You use your own entry methods to initiate trades within the space allowed by your risk and gains.