When trading, it is important to allocate your lots correctly to trading zones. A trading zone is a range of prices where a security is likely to trade for a period of time. By allocating your lots correctly, you can increase your chances of success and reduce your losses.
One important rule of thumb is to reduce your lot allocation to trading zones as the zone gets more retested. This is because the more times a zone is retested, the more likely it is to break down.
There are a few reasons for this. First, each retest weakens the zone. Second, the more times a zone is retested, the more likely it is that traders will start to lose confidence in the zone and move their stops. Third, the more times a zone is retested, the more likely it is that a breakout will occur.
Here is an example of how to reduce your lot allocation to trading zones as the zone gets more retested:
- First retest: Allocate 100% of your lot to the trading zone.
- Second retest: Allocate 75% of your lot to the trading zone.
- Third retest: Allocate 50% of your lot to the trading zone.
- Fourth retest: Allocate 25% of your lot to the trading zone.
- Fifth retest: Do not allocate any lots to the trading zone.
Of course, you can adjust this rule of thumb to fit your own trading style and risk tolerance. But it is important to remember that the more times a trading zone is retested, the more likely it is to break down.
See some more tips for reducing your lot allocation to trading zones as the zone gets more retested:
- Use a stop-loss order to protect your profits.
- Use a take-profit order to lock in your profits.
- Use a trailing stop-loss order to follow your profits.
- Monitor the market closely and be prepared to exit your trade if the zone breaks down.
By following these tips, you can increase your chances of success and reduce your losses when trading
POSTED IN: Online Trading for Beginners