That old chestnut. "Never add to a losing position."
Well, in my experience, that been a true risk management philosophy that has worked for stocks, since no matter how good the fundamentals might be for an individual stock, wider market girations can have a negative effect on an individual stock, sometimes for an uncomfortably long period of time.
However I'm learning that this old maxim ain't necessarily so for currencies.
I might see a technical long entry point for a currency pair (EUR/USD), but for whatever reason, the position might start to go against me. That would be a great time to GO LONG AGAIN.
Why? Because currency trading relies on understanding the Fundamentals as well as the Technicals. Adding to an initially losing position can be a great way to generate greater profits. I'm merely taking advantage of the random movements of short term price action.
But of course, my risk management has to be in place: low leverage and small trading positions, otherwise if it really sustains a negative move against me to the point that the fundamentals have changed, then I still have plenty of money left to trade with.
Well, in my experience, that been a true risk management philosophy that has worked for stocks, since no matter how good the fundamentals might be for an individual stock, wider market girations can have a negative effect on an individual stock, sometimes for an uncomfortably long period of time.
However I'm learning that this old maxim ain't necessarily so for currencies.
I might see a technical long entry point for a currency pair (EUR/USD), but for whatever reason, the position might start to go against me. That would be a great time to GO LONG AGAIN.
Why? Because currency trading relies on understanding the Fundamentals as well as the Technicals. Adding to an initially losing position can be a great way to generate greater profits. I'm merely taking advantage of the random movements of short term price action.
But of course, my risk management has to be in place: low leverage and small trading positions, otherwise if it really sustains a negative move against me to the point that the fundamentals have changed, then I still have plenty of money left to trade with.
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