Don’t Pyramid A Position |
This is a sure re way to lose money is to build positions with a top-heavy pyramid. |
Many investors mistakenly believe that as a market moves in their favour, they must |
add more and more positions to maximise the move. What happens, of course is |
the pyramid is built upside down. The more contracts that are added the more top |
heavy the pyramid becomes. The slightest change in market direction will then send |
the pyramid crashing down. If you really want to try pyramiding give it a rm base |
by putting your largest position in the market at the start. Add successively smaller |
trades as the market moves in your favour. You will still have a good-sized position at |
the end of the move and your average cost will be much less than with the top-heavy |
version. Top heavy pyramiding does not generally work so avoid it. |
Don’t Share Your Trades With Friends |
Your trades are not important to your friends so don’t tell them. This will stop you |
reinforcing the reasons for your position to yourself. If you do this you will be inclined |
to hold onto them in spite of what your method is telling you. In fact don’t discuss |
your trades with anyone. It will in the end lead to swapping of opinions that will end |
up confusing you and diverting you from your own market conclusions. A good trader |
will not express to many opinions to others, as there is nothing to be gained and the |
trader will upset his discipline and focus by doing so. |
Don’t Trade Unless You Have Risk Capital |
If you can’t afford to lose you can’t afford to win, it’s as simple as that. Trading scared |
money means you are emotionally involved and once emotions are involved your |
trading will suffer. |
Don’t Trade On Emotion - Stay Disciplined |
The enemy of all traders is emotion. Staying disciplined sounds simple on paper but |
in the adrenalin rush of trading it is hard for all traders no matter how experienced |
they are to do. The thoughts in this article are designed to give you some idea of how |
to construct a plan that will help you trade a sound logical method, with discipline |
and avoid some of the most common pitfalls that |
novice traders make that are a product of their |
emotions. |
Final Words... |
Your trading plan is personal to you and it is |
essential you stay focused on your path to longer- |
term pro tability. It’s not easy, but it’s not as |
dif cult as some would have you believe. Many of |
the points in this essay may seem obvious but the |
majority of traders don’t heed them. If you do you |
will give yourself a head start on the road to a |
successful trading career. |