Postby MightyOne » Fri Jun 20, 2014 5:21 pm
You never would hold an option to maturity; you either roll it out or trade it for the underlying prior to expiration (or do more complicated things).
If you start with 2 units and 15 space & manage to increase to 18 units, before losing everything but 5 pips, then you still make 2:1 on your money.
You can also reduce your space by 1.7 pips, after increasing to 18 units, to bring your risk to zero; the higher you get your lot size the easier it is to eliminate risk.
My mentality is simply this:
1) Trade a long term extreme
2) increase size
3) increase size
4) strengthen position (assuming adding has brought the position off of the extreme and closer to the current price).
Remember: you don't make money without size but you also don't make money with a weak position; you must keep rocking back and forth between size and strength.
Remember: you are simply trading and trailing stops on larger charts, any other thought is secondary.