Everyone knows that to trade successfully we need a good and most suitable trading system with a higher probability of winning! And beyond a good system, we need a stable mentality and a rigorous capital management strategy. Here we will not talk about the psychological factor because it takes time for traders to experience it on their own, but we will talk about the other one - important but often overlooked, capital management.

We roughly divided into two types of capital management including:
  • Method 1: Manage your capital before you enter the market (ie before entering the order);
  • Method 2: Manage your capital after you have entered the market (ie after placing an order);
For the first one, the traders will calculate the position size and the stop loss position according to each person's capital management method (classic type is 1-3% per trade). Everything is relatively simple and most traders use this method of trading. There are a number of reasons for this including some find it easier to trade this way, others completely unaware of the latter.

However, equally important is keeping track of your (open) trades and managing capital wisely, this is the number 2 way and it can help traders maximize profits or minimize losses. Losses depend on market conditions.

And there is a method of capital management for open transactions that are "lock them up". So what is the "key" here? To put it simply, it means that we open a position opposite to an existing position with the same volume, people in the profession often call a hedge order (temporary translation: reciprocal order).

For better understanding, let's see an example:


First, your trading system signals us to open a long position at point 1 (point 1). You enter an order but after a while the price goes against expectations, reaches a certain level, you realize that the price will not follow its analysis in the near future, and you decide to open a reciprocal position. with the same mass at point 2 (point 2). Now, your order is officially "locked", the loss will not change no matter how the price moves up or down because the profit/loss will be offset by two orders.

The next important step is to find an advantageous price range so that we can "unlock". Imagine the price reaches point 3 (point 3), you expect the price to go no further and decide to close the buy order (number 1) with a profit. Here's how we unlock it.

At this point, we are left with a losing position, the price then follows your prediction and you finish the reciprocal order at point 4 (point 4) and make a little profit. That is, instead of ending the first order with a loss, we have two profitable orders.

In addition, you may consider partial locking, ie on a matching order with disproportionate volume, for example, the first order is 1 lot then the reciprocal order may be at 0.7 lots. This is often used in situations where you find that the possibility of a major reversal occurs but the price will soon return to the direction you calculated.

Surely you would say that the example is always perfect! Yes! In fact, things don't always go well, you have to adapt to market changes. Some experts trading with this method can skillfully open-lock, but amateurs can lose more if they do not know how to apply it. That is why there is always debate about whether or not to adopt this approach. And for even traders using this method, there is no consensus. Some say it is the last resort for them to save their deposit, others use it as their main strategy to make a profit!


So is there a way to make using this method safer? Here are some tips that will help you:
  • Don't get locked out too early, your entry point is seldom perfectly accurate;
  • Only unlock when there is a clear signal, try to use critical drag zones to do this;
  • Do not open-close the lock too many times because it will cause you to take small profits and prolong your losses;
And in the end, this method is not as simple as it looks, if you want to apply it, do a demo test or with an account that does not affect your financial ability!