This is the second article in the series of two. In the first article I wrote about pyramiding and scaling in. If You didn't manage to read it click on the link Trade Management Techniques, Part 1 .
In this article I will cover:
- Scaling in
- Martingale and anti-martingale
- Trailing stops
This method should be used in trending market conditions, especially in swing trading. The idea here is to protect the largest part of the profit and expose to risk only the remaining part of a position. It is done by closing part of a position at predetermined price level. Usually half of the position is getting closed, but different percentage can be used to fit your strategy. It repeats once the next price level is reached until the stop loss is hit. Stop loss also has to be moved or trailed. It means that once the trend is over the most of the profits are safe and only the remaining position will result in loss. Obviously this is a good way to protect Your profits especially when the trend doesn't continue for too long, but if it does then we miss the opportunity to capitalize on a full position size. This is almost completely opposite to pyramid…