Floating profit addition refers to the act of adding another order in the same direction after a position has made a profit, thereby increasing the total position size. Suppose the original position was 1 contract, and an additional 1 contract is added, the total position would then be 2 contracts. If a reversal occurs at this point, the floating loss will also increase due to the heavier position, effectively doubling the risk.

There is a common saying in the market: "Add to a floating profit, and you might lose it all in one go."

However, the higher the risk, the higher the potential profit, which is directly proportional. If done correctly, floating profit addition can also significantly increase our profits.

The diagram shows an illustration of floating profit addition. After the market breaks above the downtrend line, confirming a bullish trend, it completes the first wave of the rise and then starts to fall back. It stabilizes after testing two moving averages, forming a reversal candlestick pattern to enter a long position, with the entry price at 1647.

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After entering the position, the market continues to rise, and an additional position is added when it breaks through the previous high, with the additional price at 1662.

After adding the position, the market continues to rise, and the position is closed after a top breakout at a high level, with the closing price at 1700.

Let's do the math.

The profit from the first order is 1700 - 1647 = 53. After adding the position, the profit increases by 1700 - 1662 = 38.

Originally, there was only a profit of 53 USD (space), but now it has become 91 USD (53 + 38). A single additional order has increased the profit by 70%, which is still quite considerable.

Therefore, we should view floating profit addition more objectively. Although it does increase the risk, if done correctly, it can also lead to higher profits.So, how should we add to our positions in actual trading? Here are two of my experiences.

1: Add to the position conservatively, waiting for a market pullback before doing so.

The most feared scenario in adding to a position is that the market pulls back right after the addition, causing the previous profits to be quickly given back. Once the profits are gone, traders will face significant psychological pressure, making their position holding less firm, and they might hastily close their positions under the pressure, leading to a failed trade.

Therefore, in our position-adding operations, we can choose to add to our position during a market pullback after the first order has made a profit. This way, since the market has already pulled back, the added position is at a relatively low level, and the situation of profit giving back and resulting in a floating loss is reduced.

In the chart, the market formed a breakout at the bottom of the channel line. After the breakout, the market opened a position, and after the position was opened, the market rose sharply, and the order made a profit.

Do not add to the position when the market is rising sharply, but wait for the market to fall back. When the market falls back to around 1914, add to the position in conjunction with the candlestick pattern. At this point, the market has already fallen back 80 points from the high. Although the market continues to fall back and fluctuate after adding to the position, the added position is relatively low, and the floating loss caused by the market pullback is also relatively small. Our trading pressure is reduced, and then the market reverses, and the upward addition to the position is successful.

Additionally, adding to the position during a pullback, as opposed to adding at a high level, gives the order entry a more advantageous price and makes it easier to set a stop loss. After the market moves, the profit is greater. Of course, there is also a significant disadvantage to adding during a pullback; if the market moves quickly and does not pull back, the opportunity to add to the position will be missed, which is something that must be paid attention to in actual combat.

2: Use a pyramid method to add to the position.

Everyone knows what a pyramid is, with a larger base and a smaller top. As the name suggests, the pyramid method of adding to a position means that the position size of the added order is less than that of the first order. Assuming the first order is opened with 10 contracts, then the pyramid method of adding to the position requires the added order to be less than 10 contracts. If there is a second addition, the position size should also be less than the position size of the first addition.

For example, if the first order is opened with 10 contracts, the first addition is 8 contracts, and the second addition is 6 contracts, and so on.This operation is carried out because the lower positions are heavy, and the upper positions are light. Even if additional positions are added at a high level, and the market falls back, the floating losses will appear more slowly, and the trading mentality will be more stable, which is conducive to the execution of our trades.

Of course, since the positions are added in smaller and smaller amounts, the overall positions are fewer, and when the market trend emerges, the profit space will also be smaller. We can understand pyramidal position addition as a kind of compromise in position addition, allowing risk and return to be in a middle ground, where the risk is not absolutely high, and the profit is not absolutely low. Overall, it is more balanced, and the difficulty of execution is also smaller. Therefore, this method of adding positions is still suitable for the majority of people.