One of the first lessons that most noobs learn in FX is the dangers of the Martingale system. In fact, many seasoned traders have taken this lesson so far as to think that you should never increase your stake in a currently-losing position. I've seen other posts in this forum where idiots claim that any time you add to a losing position, you are employing a Martingale strategy and it is doomed to fail. Of course, this is absolute rubbish.
When I am on the losing end of a trade, I am always assessing the open position to determine if there is any reasonable opportunity to, in a measured manner, increase my stake in the position. Notice, that I did NOT say that I start doubling up on the position, desperately hoping to get my money back. Instead, I evaluate the position to determine if the original trading parameters still hold true. If they do, I consider increasing the stake (NOT continually doubling it, but slowly increasing it based upon predetermined parameters).
So this is how I'm using this HL Counting Method right now in my live trading. I have an EA that already opens trades based upon different parameters - parameters that having nothing to do with the HL Count. However, after those trades are open, I use the HL Count to determine whether or not I should add anything to the existing position.
For example, my EA opens a long position. Then the trade goes against me and I find myself down by 50 pips. From there, a few things could happen. If certain parameters are met, then the trade is just closed at a loss and I live to trade another day. BUT, if the closure parameters are not met, then the EA checks the HL Count. If the HL Count is still positive (in other words, if the HL Count still favors a long position), then I might add a little bit to the open position.
It is still early, but so far I have found that this works wonders to mitigate losses. When I'm stuck in a losing position and the HL Count has also gone against me, this is a great sign that tells me, "Either close the position, or, at best, just leave it open with the base sizing in place - do NOT increase your stake." But when I'm stuck in a losing position and the HL Count turns in my favor, this tells me, "You might want to throw a few more lots into this trade because a reversal appears imminent and you will recover faster."
All this being said, I urge caution with this approach. Increasing the size of losing positions - even when done in a controlled fashion - requires some serious finesse. I would not recommend this approach for noobs doing manual trading. If you're new and you're making manual trades, the temptation is just too great to chase your losses.
When I am on the losing end of a trade, I am always assessing the open position to determine if there is any reasonable opportunity to, in a measured manner, increase my stake in the position. Notice, that I did NOT say that I start doubling up on the position, desperately hoping to get my money back. Instead, I evaluate the position to determine if the original trading parameters still hold true. If they do, I consider increasing the stake (NOT continually doubling it, but slowly increasing it based upon predetermined parameters).
So this is how I'm using this HL Counting Method right now in my live trading. I have an EA that already opens trades based upon different parameters - parameters that having nothing to do with the HL Count. However, after those trades are open, I use the HL Count to determine whether or not I should add anything to the existing position.
For example, my EA opens a long position. Then the trade goes against me and I find myself down by 50 pips. From there, a few things could happen. If certain parameters are met, then the trade is just closed at a loss and I live to trade another day. BUT, if the closure parameters are not met, then the EA checks the HL Count. If the HL Count is still positive (in other words, if the HL Count still favors a long position), then I might add a little bit to the open position.
It is still early, but so far I have found that this works wonders to mitigate losses. When I'm stuck in a losing position and the HL Count has also gone against me, this is a great sign that tells me, "Either close the position, or, at best, just leave it open with the base sizing in place - do NOT increase your stake." But when I'm stuck in a losing position and the HL Count turns in my favor, this tells me, "You might want to throw a few more lots into this trade because a reversal appears imminent and you will recover faster."
All this being said, I urge caution with this approach. Increasing the size of losing positions - even when done in a controlled fashion - requires some serious finesse. I would not recommend this approach for noobs doing manual trading. If you're new and you're making manual trades, the temptation is just too great to chase your losses.