Adding contracts to a small losing position

Discussion in 'Index Futures' started by EMini-Player, Aug 7, 2003.

  1. I'm currently playing around with the mini-dow, and I'd like to know whether it makes sense to add a contract to a losing position to bring your avg cost down. Reason is, it takes a lot of skill to be 100% correct on your entry and a lot of times a position will go slightly against you before it turns in your favor. Here's an hypothetical example:

    Short 1 YM @ 9094

    YM heads higher and tests resistance at 9100.
    Short another YM contract at 9100

    So, now you're short 2 contracts at an avg cost of 9097.

    Does this make sense when playing the YM? Keep in mind you can still manage your risk so that the overall loss limit remains constant.

    Thanks,

    -FastTrader
     
  2. Don't do it...
     
  3. candletrader, can you provide some further details on why this would be a bad practice? If selling at 9094 was a good idea according to your analysis, then selling another at 9100 should be OK too, right?

    -FastTrader
     
  4. ... so would selling at 9200, perhaps?... how about selling at 10,000, while you're at it? :cool:
     
  5. Pabst

    Pabst

    Not to mention how choice those 9118's would be. And then it must be a lay-up selling that fourth contract at 9155! ROFL!
     
  6. .
     
  7. Quiet1

    Quiet1

    ignore them...all that matters is your net expectation. if you average you end up with stats like 75% winners and AveWin:AveLoss ration of 0.5. ie YOU STILL MAKE MONEY AS LONG AS ITS IN YOUR PLAN.

    Most of the trading truisms spouted by idiots on this board are intended for trend following type trades (ie 35-65% wins with 3-1, 2-1 or even 1-1 avewin aveloss ratios.) THERE IS NOTHING WRONG WITH 99.9999999999% wins and a 0.01 ave win to ave loss ratio as long as you can handle it.

    lets stick to facts not traders conventional wisdom!

    Q1
     
  8. This is an integral part of my trading plan. I do it on a regular basis. Once I establish an entry zone, after I put on my first position I will let it run against me (if it decides to) by two (2) points then add another contract or two. From there I will accept only one (1) more point drawdown as a stop. Exit all positions if stop is hit. Total: -4 points on two contracts.

    I have to stress that I only do this IF I feel very confident about the entry. Heaven knows how difficult it is to nail an entry and watch it go your way immediately. I don't and won't pyramid.
     
  9. I think the examples mentioned so far are pretty exaggerated. I'm talking about a small 10 pt range on YM. Stop-losses would still be used. And an additional contract (notice, it says contract and not contracts) would only be added in the scenario when the charts are still in your favor. Most traders know when they've made a bad entry, and when the entry is OK, but the trade just needs some wiggle room. A contract would only be added when the trade is going through some normal wiggle. We're simply taking advantage of the wiggle and bettering our overall position.

    I'm following what you all are syaing but just want to discuss this a bit more.

    Thanks.

    -FastTrader
     
  10. Trading is so simple
    If you follow the rules, you make money
    It doesn't take brains or skill
    just the ability to follow rules
    almost all traders are too independent to follow rules

    No matter what, somebody will try to figure out some exception to the rules

    When the rules produce an inevitable drawdown, traders abandon or modify or flat out break the rules.

    Following the simple rules is the hardest part of trading and almost no one can do it.

    The 4 rules
    1. Don't try to pick tops or bottoms
    2. Cut your losses short
    3. Let your profits ride
    4. Never add to a losing position

    It is so hard to follow the rules that most traders prefer to read a whole library of trading books and test systems and subscribe to tip services, because anything is easier than following the rules.

    And even if you could follow them, you will probably never convince yourself that it could be this simple.

    And even if you are convinced it is this simple, you will probably try to figure out some way to improve them or make them more complex.

    The rules are the edge. But you will never lose the edge by disclosing the rules, because most traders can't follow them anyway, and that's why if you are one of the few who can follow the rules, you end up with an edge simply by collecting money from the all those who can't.
     
    #10     Aug 7, 2003