Of course, adding to winners is a very profitable way to trade. My question is when adding to winners, which inherently lowers your average, how does that affect your exit/stop? When it comes back the now shorter distance to your breakeven do you take some off? Exit completely? Because now when it goes against you you are losing more then your original stop had dictated. But the resistance that you were stopping out beyond wouldn't have been broken yet with this new lower average. just curious what peoples thoughts are on this method and general strategies.
I can only tell you how I do it. I only add to a winner once. Out of the fire into the frying pan. I add because I want my winners to be larger positions than my losers. I only add once because I don't like to keep raising my average price, and a full load is plenty to make me a lot of money yes, the stop gets moved to the same dollar amount as the original trade that's just the way I do it, I'm tired of defending it, but I like discussing it it works for me, but there may be other things involved I get stopped out a lot, that's all I do all day long is take losses not for the faint of heart but yes, adding to winners is a very important part of my trading, couldn't live without it I can only wait for the naysayers who tell me I could have just put it all on the first time and come out ahead, that's what they always say, but they are not trading my money. Lord help you if you ever ask about adding to losers.
Trend followers should add to winners, since a winner means the trend has strengthened. The market has no memory, it doesn't know about your original trade. Treat the addition as a new trade. Set the stop on it separately. However if you're adding at a new high (low), and you're using trailing stops which are adjusted as vol changes (as you should), then the new trade will have the same stop as the original trade.
well, a winner doesn't always mean the trend has strengthened, but that is what I am betting on. Sometimes it means you just added at the absolute top. The question was about the stop, and should it be moved. The easy way to do it if you are manually trading a lot of positions like I do is to have one dollar stop for a minimum position and another wider stop for a maximum position. And since, at the moment, I am only trading either a min or a max position (since I only add once) it keeps it managable for a deteriorating brain. otherwise, the strategy is always the same, keep your losses short and your profits large, but there are many endless tweaks which I adjust based on my reading of current (and hopefully future) conditions.