Open Positions Are Gradually

     At the time of opening the position, we should not directly spend ration of the margin that you use at once. For example, you specify a margin of 5% would like to use, we recommend 5% margin is not spent with open one position only. For the margin positions, e.g. 1% every time you open a position, to 5% of the time. This strategy is called averaging.

     

   This needs to be done because the Forex market is very dynamic. Sometimes can turn direction suddenly. In addition there are always price fluctuations although the trend could already guess. This strategy will reduce the potential for loss. If all at once directly spend all rations margin, when price reverses direction, you are just going to bite the fingers could not open position again at a better price. Thus this strategy is also known as divers risk indication by time. As an illustration, take a look at the picture on the following page. The picture shows an example of price fluctuations of the currency in a certain time period. Imagine if you spend the entire ration margin when prices are tinggi-tingginya. Can You stomach mules.

The table on the next page will show you the difference when we do the averaging time of position opening. In addition to reducing the potential loss, averaging also useful increase potential profits.

    For example a 5% margin rations enough to open the position as much as the 5 in lot standard account. You predict the price will go up, and then open position buy EUR/USD at point 1 using the entire ration margin (lot 5). Then the price goes down, even to touch the point A, if you cut the loss, then the loss experienced is 5 x (1,4285-1,4352) x $10 =-3350 USD.

Whereas when you wait, then sell them at the point of

B, your profit is 5 x (1,4370-1,4352) x $10 = 900

USD.

We will now try to calculate by using the strategy of averaging. You open 1 lot units at point 1. Then when the price goes down, add to each unit 1 lot in points 2, 3. The current average price is 1.4329. When you cut the loss at the point of A means to harm you 3 x (1,4285-1,4329) x $10 =-1320 USD.

If you keep waiting and then add again in

points 4 and 5. Then the average price now is 1.4335.

When you sell them at point B, then your profit is

5 x (1,4370-1,4335) x $10 = 1750 USD.

The question now is how to do the averaging. In principle there are two methods to do the averaging, i.e.:

  1. AVERAGING DOWN

Here the addition position is done when the price moves against the early predictions. For example, initially open a buy position, it turned out that prices move down, and then you open the position again at lower prices. When you initially were in the position of selling, the price is going up, even as You add more positions in the price above.

  2. AVERAGING UP

Here the addition position do when prices are moving in line with predictions. When you initially open a buy position, price and even move down, then the time is already seeing signs of price moves up, you add again a buy position. When it was originally in position to sell, prices rise instead, and then wait until see a sign prices turned down, and You add the selling position again.

Which One Is Better?

Averaging down is a pretty aggressive strategy, since you will continue along the margin procure price moves in the opposite direction with its original prediction. But you will not know until where prices will stop moving counterclockwise. Traders must also have the discipline to do averaging down. This strategy is easy to follow if done once or twice, but if the prices continue to the opposite, the trader will be easier emotionally affected.

Whether to continue the averaging down or not. But in General, when

your position is still in line with the long-term trend, this strategy is quite effective. Because in these market conditions, the price moves in the opposite direction and trend in limited.

Instead, averaging up according to me better than the averaging down because we recently purchased stock at a time when price reverses direction. When we do the averaging down is usually the price already move on and penetrate a particular support level. If we impose averaging down, usually the loss we will still continue to grow.

If we do averaging up, the problem is to determine the price at the point of reversal of direction. Often we miss, and many users have already reversed course prices too far. Not to mention if we're wrong predictions, when the price will turn direction, eh turned out to be just a hokey-tipu and move the more opposite again.

On the stock market, I quite often suggest strategies averaging and I presume that is reasonably passable averaging strategy can be relied upon. This is due to the movement of stock prices that are not too volatile and the price swing range not too far than forex. Whereas in forex rates could move so far away, in a day can 100-200 points. Compare with price movements in the stock market the most only 2-10 points per day

To that end, in online forex trading I recommend using strategies averaging more carefully.