top of page

Layering Entries to Reduce Risk

More often than not, when it comes to blown account, the problem derives from position sizing. When trading Futures, and you have access to a great deal of leverage, it's very easy to go overboard. The tendency to lever-up, either through overconfidence, or an attempt to win back losses, can severely diminish a trader's success.

One thing you can do, however, is layer your positions. Here's one strategy you can employ, however, when trading breakouts.

When trading a breakout, we put on our first trade in anticipation of the break. If you are in a trading range, for example, and are putting on a long position. you would enter at the bottom of the range, putting your stop just below it. The second position would be entered right after the breakout; it might be helpful to put in a buy stop-market order, just above the resistance level, where the sellers are putting their stops. The final position would be added on a re-test of the resistance level, as it turns into support. That way - if the range breaks - you're only going to get stopped out on one contract, rather than two. Concurrently, if it ends up being a failed-breakout, you are likely able to get out a breakeven, because you would still be in profit on your first contract.

I can't tell you how many times I've gotten trapped by entering with full size at the breakout point; it doesn't happen that often, but when it does, the repercussions can be brutal. By layering your entries, however, you can reduce your risk on the trade, and trade sustainably - which should always be our goal.

Although it's a small adaptation, profitable traders are built on thousands of small changes like these, that ultimately lead to a well-rounded, sustainable career. I hope you've found this information useful!

33 views0 comments

Recent Posts

See All

Hey guys, I just wanted to share my new/updated morning prep. materials. Have included several file types for your convenience. XPS Document (MS Office): PDF Document:

bottom of page