what is a layered entry strategy?

There are a lot of entry strategies in the forex market and there is one in particular that is considered safe and that strategy is the layered entry strategy. Do you know what that is? Please explain.

Thank you.

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Forex trading is a very tough business and any mistake can be costly for the trader and because of this reason we see traders come up with many different strategies to cope for their needs. A layered entry is one of those strategies that traders created to handle the hectic nature of the market. So what is a layered entry?

Definition
Layered entry strategy is a method for a trader to handle price using different price levels to be able to capture different market conditions and different levels of strength in momentum. The forex market moves very strongly compared to other trading instruments and of course, we will see different market scenarios changing at a rapid pace.

The purpose of this strategy
There is a reason behind every trading strategy that you find in the trading world and knowing the purpose of the strategy is crucial to the success of the usage. A layered entry strategy is designed to handle market fluctuation so that we can still stay in the position even if the market behave erratically. We've seen many times where price hit our stop loss and after that the price eventually go to hit our supposed take profit level. Some people call this a fake out some others call it stop loss hunting (only at certain price level) and some others call it fake signal. This specific entry strategy will help you to profit even during such market condition.



How it works
This strategy requires splitting the position into several smaller-sized positions and then putting each of them at different price levels. for example:

We split the position into 5 and then we put the buy position #1 at 1.0010 and then position #2 at 1.0020 and all the way to position #5 at 10 pips apart from each other. Each position will be equipped with their own stop loss and take profit target like so:

#1 entry 1.0010 stop loss 0.0090, take profit 1.0070
#2 entry 1.0020 stop loss 1.0000 take profit 1.0080
#3 entry 1.0030 stop loss 1.0010 take profit 1.0090
#4 entry 1.0040 stop loss 1.0020 take profit 1.0100
#5 entry 1.0050 stop loss 1.0030 take profit 1. 0110

And let’s say that the price went up to 1.0015 and then down to 0.0085 and then up again to 1.0115. Under this market scenario if we only use 1 big position at 1.0010 then we will lose money because the price went past the stop loss of 0.0090 before it went up to 1.0115. However, because we are using layered entry strategy we only lost position #1 and get the take profit for position #2, #3, #4 and #5.



The market scenario described above is very common in the forex market because of the high volatility of this trading instrument. There are also things that traders can do to enhance the safety of this strategy such as moving the stop loss to BE gradually to protect the running profit. Different variations of this layered entry strategy can be found all over the internet these days.