Don't Pyramid a Position


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.