Posted by: joetradingplace | June 10, 2013

MM to Improve Profitability

Trading multiple positions is an efficient way to improve your trading results. This provides flexibility in managing your position and taking advantage of the move.  You can stagger your TP accordingly and move stop loss to breakeven after taking the 1st target and this usually helps from a psychological standpoint.  You have the flexibility of scaling out of the trade while you keep yourself in the trade.  There is no point in getting in and out of a trend when you can simply take a single trade and just manage it properly with your multiple lots. They make you take advantage of trending markets, you just scale out and stay in the trade for a home run.

Let’s show an example… Trader A only trades 1 lot…for him/her to make 130 pips, he/she need the market to move 130 pips plus spread..now we look at trader B who trades 3 lots, to make the same amount of pips as Trader A, Trader B only need the market to move 50 pips.

Trader B could take 30 pips as 1st target then 50 pips as 2nd and 3rd targets…already he has made 130 pips out of a 50 pip move. The market is more likely to hit a 50 pip move than a 130 pip move in a few bars.

Try this task, play the same trades you play with your strategy, but this time, try trading different multiple lots, stagger your TPs and see which one could improve the profitability of your strategy. Start from 2 Lots, 3 Lots, 5 Lots…try different combinations of taking profits…for example, with 5 Lots…try taking 1st target with 2 Lot, 2nd target with 2 Lots and final target with the last lot..or take 1st target with 3 lots, 2nd target with 2 lots.

If you try all the different combinations, you will find something that will work for you. It could also improve the win to loss ratio of a strategy…

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