Do you often encounter such trading problems:
After entering the market at the key support and resistance level, the price starts to move in the direction of our transaction, but it is generally prone to price retracement after going out of a certain space, and the next thing that is uncertain is whether the price retracement will test our entry point or entry stop loss point (key support and resistance level), as shown in Figure (1):
figure 1)
After entering the floating profit, facing the price retracement, there are unknown risks: first, our position floating profit will retrace, and second, our stop loss may be knocked out, resulting in an actual loss of principal.
If we adopt the following entry trading strategy:
Suppose you enter the market in split positions, plan to open 2 positions at the same price, enter the market in 2 trades, 1 lot for each trade, and stop loss 50 points 1R.
When the price moves 50 points along your trading direction, your total position profit is 50 points, and the profit-loss ratio reaches 1:1. If we close 50% of the position at this time, that is 1 lot, and there is 1 hand position, The stop loss remains unchanged. as shown in picture 2:
figure 2)If the price retraces 50% from the high level, it will return to the original entry point. At this time, one lot of the position will not make a profit or lose, but the one lot that is closed will still make a profit of 50 points. If the price falls to the entry stop loss point , the 1 lot of the position was stopped and lost 50 points, but it was hedged with the profit of 1 lot that was closed at a high level by 50 points. In fact, our transaction as a whole is neither profit nor loss (without considering the slippage fee ).
The above trading strategy is to control our entry risk through position management, deal with the uncertain retracement risk, and talk about long-term and profit on the premise of keeping the principal from loss.
Due to the uncertainty of the position of the price retracement, when retracing, before a new support and resistance level is formed, the original key position is a highly deterministic stop loss point.
The actual application is shown in Figure (3):
image 3)
K1 is the inside bar signal breaking through to enter the market and go long. Assuming that the position is divided into 2 lots, the entry stop loss is below the lowest price of the harami signal, and the stop loss size is 1R.
K2 is a profit that just reaches 1R, and the profit-loss ratio is 1:1. If 1 lot is closed, there is 1 hand position left.
There is a price correction in K3, and it is uncertain where the stop loss will stop, but the original entry stop loss point is a definite key support level, so the stop loss of 1 lot of the position is still placed at the original entry stop loss point. In this way, even if the price pulls back to the original entry stop loss point, there will be no loss of principal as a whole, and at the same time, it will not cause the stop loss to follow too closely and be easily swept away.
Although the profit reached 1:1 and the position was cut in half, but in exchange for the absolute safety of the principal, the remaining half position is basically a risk-free position or a room for profit in the future market of the position.
There is a signal of stop falling and rebound in K4. At this time, you can consider covering the liquidated position by 1 lot, and put the stop loss at the entry stop loss point. At this time, the overall position is 2 lots, but you can only bear the risk of less than 1R. Of course, you can also consider not adding positions, wait for the confirmation of the new key support level, and then consider choosing an opportunity to increase positions.
When the price rises to K5, it is basically determined that K4 is a key position with certain support. At that time, we can consider moving the stop loss point of the 2-handed position to the moving stop point a below the lowest price of K4. At this time, our 2-handed position is long. There is no open position with any principal loss.
K6 is a Pinbar reversal K-line signal that backtests the support level of K4. When the price breaks through the small resistance level of K5, it can be determined that a new support level is the lowest price of K6. At this time, we can move the stop loss points of all positions below the lowest price of K6 to lock in a certain profit margin.
When the price rises to K7, our profit-loss ratio basically reaches a 1:1, and the price has a certain stagflation K line. At this time, consider closing one lot, and the stop loss of the remaining one position is still kept at the moving stop below K6 Damage point b.
K8 showed a signal of stop falling and rebounding, but it did not fall below the lowest price of K6, the previous support level, indicating that the price upward trend is still continuing. Then, at the reversal signal K8, you can consider covering and increasing the position by 1 lot. Before hitting a new high, the stop loss is at Moving stop loss point b, after breaking through the K7 resistance level to a new high, then move the stop loss to moving stop loss point c below K8.
Through the case analysis, our trading strategy is to consider the position and profit on the premise of ensuring the safety of the principal, and then maintain 1 hand position and 1 lot as the dynamic increase and decrease according to the law of price fluctuations to follow the price fluctuations, so that the positions can be fully utilized. It may be safe and maximize profits as much as possible. Have you mastered such a position management strategy?
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