Pyramiding & Anti-Martingale: How to Safely Increase Profit
A common mistake for beginners in their forex trading strategy is to double the position just when they are experiencing a loss, or the term: floating loss . Among the several ways that can be done is the cost of averaging (or just averaging ) and martingale. It is true that the losses suffered can be closed quickly even replaced by greater profits provided the market wants to “be kind” in reverse, but the greater danger lurks (and often happens) when the market mercilessly goes in the opposite direction taken.
A brief explanation of averaging is as follows: a trader opens a SELL position, when the price rises he does not cut a cut but re-opens the SELL position with the same number of lots as before. The hope is that if the price returns to the first SELL price, the loss will be closed and replaced by the profit obtained from the second SELL. So on.
Now, note that the new trader will reduce the losses he experiences little by little when the price has moved down from the 1.51000 level. Level 1.50500 in the case example above is a BEP level (break event point). He will only get gradual profit when the price moves down from the 1.50500 level. Remember that this case example does not involve commissions, swaps and other transaction costs.
But the illustration above is just a “sweet story”. In fact, forex trading is not always the scenario above. Even very often the price continues its movement, for example from 1.51000 continues to soar so that the losses suffered will be even greater.
As for martingale , the number of lots used is multiplied every time it experiences a loss. It can be said that this technique is more “extreme” than the averaging described above.
In short, every time you experience floating loss within a certain distance, the trader will re-open the same position but double the lot. For example, when a trader opens a SELL position of 1 lot, then when the price rises a few pips he will re-open a SELL position of 2 LOT or double the previous lot. If the price goes up again, then he will open 4 SELL positions. So on.
Well, if you notice, the new trader will reduce the loss when the price starts to reverse. In the example above, the losses suffered gradually decreased when prices dropped from the level of 1.51000. When the price returned to the level of 1.50500, he already had a large profit.That’s the sweet story.
What is the bitter story? Just imagine if prices continue to rise above 1.51000. The number of open positions is very large, the losses are certainly greater. This is something to think about if you want to implement this forex martigale strategy .
Capital Must Be Large
Indeed, I’m not saying that averaging or martingale techniques are unclean and can’t possibly succeed. You can, but the capital you have to provide must be large.
Besides you have to really understand the characteristics of price movements, it is not recommended to use both techniques with minimal capital. If we catch a glimpse of the average forex price movements, we can simply average daily movements around 1000-2000 pips (5 decimal places). That means around $ 1,000-2,000 per day. You can imagine if you only have a capital of $ 1,000 and force yourself to do averaging , let alone martingale , of course your “breath” will ” waste”. There is a slight fluctuation, your history ends.
Do the opposite
In forex trading , there is a message that says, “Never add to a losing position.” The meaning is more or less, “If you are floating loss , do not add more positions.” Yes, this is indeed a free translation, as free as a dove. But that is indeed its intrinsic meaning.
You are permitted to add new positions when you are in a profit or profit floating condition . If it is returned to trading psychology – ” fear and greed” – then you are allowed to be a little “greedy” if your position is positive. Of course, there are limitations.
The limitation is technical analysis and capital management. If technically there is no indication that the trend will continue, then do not force yourself to open a position again. Likewise if your capital is limited.
So, instead of adding a position when experiencing floating loss , it would be better to add a position when experiencing profit floating . The goal is simple: try to increase the existing benefits. This technique is more “safe” and convenient than adding a position at loss , because at the time of your profit you will usually not get a psychological burden such as when loss . There is no loss to think about, right?
There are at least two techniques that you can run, which are the counterof averaging and martingale, namely pyramiding and anti-martingale .
Pyramiding is the opposite of averaging . With this technique, you can open a new position every time you get a profit on a certain amount that you have set. For example: after opening a BUY position, you may open a BUY position again after the price rises a few hundred pips, and so on.
In the example above, the profits gained will be even greater if the price manages to continue the movement above 1.51000. At levels 1.51500, 1.52000 and so on it is okay to open BUY positions 1 lot more, but you should have a target of how much profit you want to earn. When it reaches the target, it’s worth considering stopping for a moment and enjoying your victory.
Pay attention to the level of 1.50750 in the example above. If a correction occurs from 1.51000 to that level it is advisable to “give up” your profit to be closed at plus 750 pips, rather than turn into a loss if the price falls below 1.50500.
As the name implies, this anti-martingale technique is the opposite of the martingale technique . In this technique, you add positions and multiply the lot each time you reach a certain profit.
This technique is more fun than martingale , because when applying this technique you are in a “green” or profit condition.
All you need to remember is that both pyramiding and anti-martingale techniques should be run when the market is TRENDING. Applying this technique when the market is sideway is not recommended.
Well, congratulations on trying to increase your profits with pyramiding and anti-martingale techniques.