Position Acceleration

"Let profits run," once said one of the greatest traders, Jesse Livermore. This phrase expresses one of the key concepts in investing and trading: when you have a successful trade that is generating profit, you shouldn't close it too early. It’s important to let the trade develop to maximize potential profits. Unfortunately, many traders experience fear and emotional swings, especially when the price starts moving in their favor. They fear that the market may turn in the opposite direction, and they may lose the profit they’ve gained. Such an emotional state can lead to closing the trade too early, missing out on greater potential gains. Essentially, this phrase urges us to manage our emotions and give profits a chance to grow. But now, let's move from psychological abstractions to a more practical interpretation of this idea.

In exploring the issue of underperforming profits in trading, we at Trading Clubs have applied various methods, both in risk management and in forecasting market movements. One of the strategic elements that helps effectively manage risks with the right approach is Position Acceleration. We implemented this method in one of our bots, and let's look at an example of how it works.

Look at the image above. We have an open buy position that is currently in profit. We can close it now and secure a profit of $41.6 (taking into account the swap). But we can also risk the existing profit and try to increase it. How do we do that? We can accelerate our position by adding a new one. At what price should we open the trade? With what volume? At what price should we lock in the profit or loss of our positions? Our algorithm knows the answers to these and other questions. It uses special formulas to process the parameters of open positions, combine them into a multi-position, and manage them to maximize the acceleration effect.

The position acceleration algorithm has certain settings:

• Maximum Accelerations — the maximum number of acceleration positions.
• Start After Profit ATRs — the number of pips (equivalent to a number of average true ranges) after which the bot starts accelerating.
• Intervals Multiplier — the interval multiplier between acceleration positions.
• Stop-Loss Price Correction — a correction for the distance between the "zero-profit price" and the current market price to set the stop-loss for the multi-position.
• Stop-Loss Volume-Pips Correction — a correction for potential profit (in terms of the volume of the multi-position) to set the stop-loss for the multi-position.
• Take-Profit Volume-Pips Impulse — the potential profit impulse (in terms of the multi-position volume) to set the take-profit for the multi-position.

Now, let's examine how these parameters work in the market situation shown above.

If the acceleration position hasn’t been opened yet, and only the initial profitable position is open, the bot looks at how far the market price has moved from the initial position. It measures this distance not in pips, but in Average True Ranges (ATR). Since the Start After Profit ATRs parameter is set to 3, the price must move three ATRs before the acceleration procedures begin. Once this condition is met, what does the bot do next? It simulates the opening of a position with the minimum possible volume and uses special formulas to calculate the "zero-profit price." This is the price at which the two positions (the real, already profitable one and the virtual one opened with a minimal volume) would close with a net profit of zero. Usually, this "zero-profit price" will be somewhere between the originally opened position and the current market price.

Next, the bot calculates the distance between the "zero-profit price" and the market price. This distance is measured in pips relative to the volume of the potential multi-position. The bot calculates the potential profit of the multi-position relative to the "zero-profit price." If the entire range is taken as a value of 1.0, then using the Stop-Loss Price Correction parameter, we determine at what level the stop-loss for the multi-position (formed after opening the new acceleration position) will be set. The Stop-Loss Volume-Pips Correction parameter determines how much of the profit (relative to the 1.0 value) we are willing to keep in case the stop-loss of the multi-position is triggered. The remaining profit is sacrificed for the opportunity to open a new acceleration position of a certain volume and capture more profit if the market price continues moving in our favor. The Take-Profit Volume-Pips Impulse parameter, in turn, participates in calculating the take-profit level of the multi-position by multiplying the potential profit range of the multi-position relative to the "zero-profit price."

After calculating all potential levels for both favorable and unfavorable outcomes, the bot proceeds to calculate the volume for the acceleration position. Let’s take another look at the acceleration parameters. Stop-Loss Price Correction = 0.4 means that the stop-loss level of the multi-position will be set at 40% of the distance between the current market price and the "zero-profit price." The lower this value, the closer the stop-loss will be to the initially opened profitable position, and the higher the value, the closer the stop-loss will be to the acceleration position. Stop-Loss Volume-Pips Correction = 0.2 means that if the stop-loss of the multi-position is triggered, we will keep only 20% of the accumulated profit from the initial position, sacrificing the remaining 80%. Take-Profit Volume-Pips Impulse = 2.2 means that the take-profit for the multi-position will be 2.2 times greater than the total profit we are willing to sacrifice. Based on these parameters, and using our algorithms, the bot calculates the volume for the acceleration position. In case of an unfavorable scenario, we can preserve 20% of the accumulated profit, while in a favorable scenario, we can gain an additional 120% of that profit.

Look at the image above. The bot has made all the calculations and opened a position with a volume of 0.06 lots. It has also adjusted the stop-loss levels of the open positions to match the new stop-loss level for the entire multi-position. The same was done with the take-profit levels. Now there are two possible outcomes: either the price moves against us, hitting the stop-loss and we lose 80% of the accumulated profit, or the price moves in our favor and we double it. However, even the second scenario can develop in two ways. We have the Maximum Accelerations parameter set to 3, meaning we can open a maximum of three acceleration positions. So far, we’ve opened only one, leaving room for two more if conditions allow. One such condition is the Intervals Multiplier set to 0.6, meaning the price must move 0.6 of the range between the two previously opened positions. If the conditions for opening a new acceleration position are met, the bot performs the same calculations as in the previous cycle.

As we can see from the image, the price moved in our favor, and the bot opened another acceleration position with a volume of 0.1 lots. Why is the volume larger than the previous one? Because the first acceleration position increased the accumulated profit, and now, even with the same acceleration parameters, we can sacrifice more profit, which led to the larger volume of the new acceleration position.

The price continued to move in our favor, and the bot opened a third acceleration position. Since we were allowed to open only three acceleration positions based on the parameters, this will be the last one. Its volume is now 0.15 lots. As we can see, we’ve already accumulated a considerable profit, which is reflected in the increased volume of the acceleration position. At this point, we either lose 80% of that profit, or we increase it by 2.2 times. But even if the stop-loss of the multi-position is triggered and we only retain 20% of the current accumulated profit, we will still pocket approximately 29$ (factoring in slippage). Of course, this is less than the original $41.6 profit we could have closed at the beginning before opening acceleration positions, but we’ve now accumulated a huge profit potential, and the likelihood of reaching the take-profit has increased due to the expansion of the range between the current price and the "zero-profit price." As this range has expanded, it also allowed us to move our 40% stop-loss level further away from the current price, giving our multi-position a higher chance of surviving market fluctuations and price swings. Let's keep watching the situation.

As we can see from the image, the market price has almost reached our multi-position take-profit level and may soon hit it.

The multi-position closed at the take-profit level. The entire acceleration cycle, consisting of three acceleration positions, ended successfully. Starting with a relatively small profit of $41.6, and each time sacrificing 80% of it to increase the reward potential by 2.2 times, we reached a profit that was 7.77 times greater ($323.24 / $41.6) than the initial profit. We didn’t just let the profit flow — we allowed it to proportionally accelerate. Through mathematics and algorithmic trading, we’ve automated the process of efficiently utilizing capital to maximize gains.

Let profits accelerate!