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Double or Even Triple Your Forex Trading Account Risking 2-5% Only

On August 29th, I published an article about two important mistakes that novice traders make: Averaging Down and Scaling Up; Which One Works?

There is no doubt that “Averaging Down” is a terrible mistake. Sometimes you succeed to double your account through averaging down (you take a position, the price goes against you… you take another position… and this happens for few times, but suddenly the price turns around and you close all your positions with a good profit), but when it turns to a habit, it will wipe out the whole account, and you will not only lose the principal, but also the profit you have already made.

In the same article, I explained that “Scaling Up” is not a good idea also, and I am against it. It is not a good idea, because it is possible that the price turns around when you add to your winning positions, and you have to close many of them with loss. Even if that is not the problem, I am still against Scaling Up, because I believe we have to keep our trading as simple as possible, and not to make it complicated with adding some more rules to our strategy about scaling up when a position is in profit.

If you don’t know what “Averaging Down” and “Scaling Up” are, please read that article, and then read the rest of this article.

A while ago, one of my friends and trading buddies who had read that article also, contacted me and explained about his “Scaling Up” strategy that has enabled him to double or triple his account sometimes. He follows almost the same trading strategy that we do, but he has some innovative methods in managing his positions and maximizing his profit. I asked for his permission to share his Scaling Up strategy with LuckScout followers, and he sincerely accepted. Thanks to him!

How Does He Add to His Winning Positions?

As you may know, when there is a strong trade setup, I take two positions with the same stop loss. Usually the first position has a 5xSL target, and the second one has no target. When the first position hits the target, I move the second position’s stop loss to breakeven, and wait for the price to run. I usually close my second position manually when a strong reversal signal forms. In some rare cases, I move the second position’s stop loss further to lock some profit. This is all I do for my positions. I don’t spend any more time on them, and I am happy with my style. However, my friend does much more than this, and he is so happy with the result. Let’s see what my friend does.

He enters the market when a strong trade setup forms. This is what I do too. However, he takes only one 2-5% risk position, with a proper and reasonable stop loss, but no target. He allows the price to run accordingly. When a continuation trade setup forms, he moves the initial position’s stop loss to breakeven, and takes another 2-5% risk position. When you move the stop loss to breakeven, there is no risk anymore, and the 2-5% risk that you had taken, turns to zero. It means your capital is safe even if the price turns around and goes against you. Therefore, you can take another position with peace of mind, as if you have no open position at all (of course keep in mind that sometimes your stop loss won’t be triggered when the market is too volatile. This is the risk you have to consider).

Besides, as your position is in profit, and so your equity is increased, and you have more room for the second position. However, the 2-5% risk he takes for the second position is based on the account initial balance, not equity (read this article to learn about balance, equity, margin, free margin, and…).

The second position my friends takes, will have a reasonable and proper stop loss too, but no target. Again, he waits for the price to run accordingly, and if another continuation setup forms, he repeats the same process.

Therefore, he only holds a 2-5% risk from the initial balance, while the previously taken positions are safe and only the last position has a 2-5% stop loss.

Sometimes when the market trends strongly, and several continuation setups form, he will have the chance to take several positions while all the previous positions are in profit and their stop loss orders are moved to breakeven.

Let me show you an example.

On 2014.05.08 he took a short position when the 2014.05.08 candlestick closed on EUR/USD daily chart (candlestick #1 on the below chart). This is what I did too. He moved his first position’s stop loss to breakeven when 2014.06.05 candlestick formed, and took the second position when a continuation setup formed by candlestick #2. Later on, when another continuation setup formed (candlestick #3), he moved his second position’s stop loss to breakeven and took another position.

All of his three positions are still open. Let’s calculate how much profit he has made so far with a $10,000 account as an example.

Risking 2% of the balance and having a 50 pips stop loss, he had to take a 0.4 lots position each time. A 0.4 lots EUR/USD position has a $4.00 pip value. His first position is in 930 pips profit ($3,720), and his second and third positions are in 700 ($2,800) and 500 ($2,000) pips profit respectively, which is $8,520 in total. It means he would have almost doubled his $10,000 account taking a 2% risk only.

What if he had taken a 5% risk? Then he had to take a one lot position ($10 pip value) each time, and so his first position was in $9,300 and his second position in $7,000 and his third position in $5,000 profit now, which is $21,300 profit in total. So his account would be tripled already.

It looks great, but you have to take some very important points into consideration:

1. We are not supposed to be that lucky always, because usually markets trend 30%, and range 70% of the time. So we will not have such a strong trend always. For example, he applied the same strategy to our GBP/CAD short trade setup (if you don’t know what I mean by “our GBP/CAD short trade setup”, I have to explain that on last August, a short trade setup formed on GBP/CAD daily chart by 2014.08.06 candlestick (#1 on the below chart). We reported the short trade setup on LuckScout, it worked very well, and now we use it to “gauge” the other short trade setups we locate).

My friend took a GBP/CAD short position almost when I did. I took two short positions as usual, but my stop loss was hit by 2014.08.08 candlestick (#3 on the below chart), and I entered again while this candlestick was still forming. My first position hit the x5 target, and I closed the second position with a ~740 pips profit when the 2014.09.08 candlestick (#8) closed.

My friend could take only one position that was closed by him almost at the same time that I closed my second position. So with this trade setup, I made more profit than him. Unfortunately, there are so many cases like this that my friend doesn’t succeed to “Scale Up”. In spite of this, even if we can do it rarely, it will have a good return.

2. In order to become able to trade and maximize the profit like my friend, we have to know how to take the “strong trade setups”, have an optimum entry, a reasonably tight stop loss, and also the ability of taking the continuation trade setups, otherwise it is impossible to Scale Up properly and maximize the profit. So if you like to copy him, first you have to learn how to pick the strong setups, and then Scale Up when continuation setups form. What he does is the maximum level a trader can go. You have to work toward that destination, and I am sure you can make it: Make Your First $100,000 Trading Forex

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36 thoughts on “Double or Even Triple Your Forex Trading Account Risking 2-5% Only
  1. Singh says:

    Good article. Co-incidentally I was thinking about this technique yesterday while driving and it looked like good strategy. But since I am novice and because of complicity I decided to not do it at this stage. I didn`t know it is called scaling up but I agree that you won`t be lucky all the time.

    Right now the main problem I am struggling is risk-reward ratio. I usually take 10% risk because smaller risk make my target (x3 or x5) small too. Small target doesn`t seem much worth pursuing and at the end I repent that I missed the opportunity. I know it is bad habit but I am wondering what is the best way to keep my losses minimum and profit maximum.

    On positive note, I agree with you, to take less and strong setup. One trade which make 100 pips is better than 5 trades which make 150pips.

    • Chris says:

      Hi Singh. The best way to keep your losses minimum and your profit maximum is being on time to take the strongest setups only.

      • Singh says:

        That is one of the best thing I learned form you. Its incredible these are common sense things but like they say common sense is not common. We as human try to complicate things very easily.

  2. steve says:

    hi Chris… that’s a great article as usual… i believe am going to get there with your amazing mentorship… i am greatly inspired by you and your buddies. THANKS!

  3. Mark says:

    Great artickle Chris. Thanks.
    It would be good to know how losses vs profits are different if your friend is wrong in ranging market and better in trending markets. But for novice trader it would be probably better use your approach as there 70% of time ranging market as you said.
    However, what do you think about combination if a trader gain required experience. To Use your system (2 positions, 1 get out at 5RRR) and once you are out with profit from 1st position and see continuation pattern, to start using your friend’s scaling approach with only 2-5% of risk in total as you described (plus you would already have your first profit from position 5RRR back home in your pocket, so no additional risk).
    Or is it getting too complicated? Just wondering 🙂

  4. okeke says:

    I think I will try out this system in the future when I begin making consistent profit

  5. ren says:

    Hi Chris your two position that you take are each 2% or combine they become 2% risk

    thanks

  6. slothinker says:

    Coincidentally, I was also thinking about this problem yesterday. Really interesting approach!

    Perhaps I missed the article, but let’s say your stock (I trade stocks) moves from $97 to $100 and the position looks very strong based on accurate chart analysis; I buy w/ a STOP just below $97. I want a 3X profit so the target is $109. A few days go by, the stock goes up to $108, then meanders down to $102 or so. How would one determine when to take a small profit (or loss) rather than wait for the target or stop to be hit?

    I’m guessing the answer is a closer reading of the candlesticks but one might also set a time-limit, I suppose.

  7. dragan says:

    Hi Chris,

    is EURCAD forming a countinuation pattern on daily?

    lpd

    • Chris says:

      Hi. If the today’s daily candlestick closes like this, yes. However, bears look a little exhausted because it seems a double bottom is forming, and some strong bullish candles have already formed.

  8. dragan says:

    Thank you very much, i will not be taking any positions, but i will watch it and learn maybe something out of it. Previous weekly candle is Dark cloud, maybe there is something on it? Thanks again…

    brd

  9. JohnM says:

    Hi Chris:

    Thanks for the post as always. Couple of questions a little off topic –

    1) Regarding brokers, I understand why you can’t and won’t make recommedations,
    but in your opinion are there any market maker brokers out there that will allow
    a retail trader to profit and succeed on a regular basis with no or little interference?

    2,) I know you advocate sticking to a system an mastering it, and not looking for other
    systems, but does this mean we shouldn’t use more than one system if we have an
    additional system that we’ve demoed and been profitable with, is it advisable to seek out trades and take them based on that system also if they present themselves?

    Thanks again Sir

    • Chris says:

      Hi John,

      You are welcome.

      1) I don’t think so. It doesn’t make sense for a market maker broker to allow the traders to win on a regular basis. Of course, in more than 95% of the cases they don’t have to do anything, because more than 95% of the traders lose on their own, and don’t need to be helped to lose 🙂

      2) I have not been able to use two systems at the same time. If you can do it, then do it. However, if you use one system properly, you will always have some good positions that will not leave any empty space for the positions of a different system. If you use each system on two different accounts, then it can be a lot of work. trading is a too easy business for lazy people. It doesn’t work when hard working people use it 🙂

  10. JohnM says:

    Thanks for the quick reply Chris –

  11. Redpants says:

    Fascinating stuff Chris thank you . For someone who combines Fundamentals and you get in at the start of a trend as highlighted then it could be very powerful .Speculate to accumulate as long as we recognise that greed is possibly the reason why a lot fail !

  12. Lekan says:

    Hi sir. Please I will like to know where did you place the stop loss in the Gbp/Cad chart above? Is it at the middle of the confirmation candle or around the opening of the candle (candle1)? Thanks very much.

  13. Parson says:

    Hi Chris,
    When there is a strong trade set up and you take two positions at the same time to maximize the profit, does it mean you have to split the position into half? or take 2 positions with the original size? For example, if I were allowed to take 1 lot, would i have to open 0.5 or 1 lot position each?
    Thanks
    Parson

  14. Cem says:

    Hi chris, i just wanted to ask you why you re-enter when candle #3 is still forming? chris you really helping so so so so much, i cant even explain myself why you doing this thank you very much(but its real VERY). i feel myself after 4 months like i really ready to go fishing tomorrow (so i don’t open my mouth to your fishs anymore that you catched and showing here ) you teaching us gow to catch that.. did u really bored of losers or it makes you angry that a lot of people in the circle of nothing in world i don’t know,just i say thank u our light house in tgis dark way (maybe its too much but i had to say that and i have right on that because i follow you from first day!!). i created 2-3 systems but i know now just they were for a kind of simple example of my imagination in my life. now chris just explain (but not in 2 words please!) me about re-enter rules please, have a good trade 🙂

  15. Len Ekenstam says:

    hi chris, one of the problems i have is recognizing when one of the pair is showing exhaustion. would you please show on a chart signs of exhaustion and when there is none. also you gave me a link to get your answers to my comments.i thought i bookmarked it but can’t find it. would you give it to me again. many thanks for your help. len

  16. Ivan Todorov says:

    One of the best articles I`ve read so far in LuckScout. But as you mentioned one of the toughest moment is reading the continuation signal , which definetely recquire a lot of experience, anyway great article ! 🙂

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