IgazI wrote:To achieve greater ratios than 1:1 you can focus on exiting prior to -30 (reduce risk) and using 1/4 of your profit to increase your position size (maximize reward).
The "adding" thing got me thinking.
Let's say I risk $100 to make $100 (with a 100 pip SL, wich is at $1 per pip). I'll call this trade #1.
Worst case scenario, I lose $100 when my stop gets hit.
But, let's say I'm at +20 pips (+$20) in trade #1. I can use 1/4 of the profit (+5) to increase my position size, so I enter trade #2 (while #1 is still going).
So, if the trades go against me I can:
1) Let both trades run, and close everything when I see that the whole thing is at -$100.
2) Close trade #2, and move up the SL from trade #1. Because if I don't adjust the SL of trade #1 that means I've only added to my risk ($105 instead of $100).
So trade #2 looks like this:
That's $0.25 per pip.
If they both keep going in profit, and my goal is $100:
Had I opened only trade #1, I would need the trade to go to $100, but since I have 2 trades going in the same direction, that means I can exit sooner because it doesn't need to get to +100.
Trade #1 would need to be at +85~ (which means that by then trade #2 would be at +65 or $16 because I opened it when trade #1 was at 20).
But isn't that essentially the same as opening a trade with a larger position size and smaller SL and TP? Am I missing something?
Or is this giving me more chances to be wrong until I'm right and I'm having a hard time grasping that?Edit:
I think that's the case. If I had a larger position size initially my SL would have to be tighter in the first place. If the position size is smaller, that means the SL can be larger. Maybe a bigger move would've taken me out on a trade with a larger position size, but the latter would've "survived".
Am I getting it or did I completely miss the point?