Blah, blah, blah, I know, poker terminology yet again…
Can’t help it, people, it’s just so valid…
When you’re holding a monster hand, you bet out on the next street to build up the pot. Similarly, when a trade starts to run, you’re looking to load up some more on the scrip at the appropriate point.
When you’re holding air, or a mere bluff-catching hand like ace-high, you check it down through the river. Likewise, if the scrip you’ve just bought into stagnates, or moves a bit down, you do not double up on your trade. Instead, you just wait for your stop to be hit, or if before that your time-stop has run out, you square-off the trade.
An aggressive-passive style?
Recipe for winning in the long run?
Right, then we’re taking it.
Two out of ten trades may start to run big. It’s taken you time, money and effort to identify those two. You are in the trade. You can feel the adrenaline pumping. Now’s not the time to sit passively. Spade-work’s all done. Right, put some more money on the winning scrip. Point is, when?
Additional points of entry are tricky.
I prefer a little margin of safety here. I like to double up at a point where there’s been some correction, and possibly when a Fibonacci level has been hit. After that, I want to see the scrip going up back through the level, and I’d like to see volume go up simultaneously. That’s my point of second entry.
You can be more aggressive, no one’s stopping you.
You can even choose to enter the second time above some kind of a previous high or above the breaking of a resistance with volume.
You do, however, stand a good chance of catching a big move in a very short time.
You see, at this particular point, where you’re choosing to enter, the scrip is pretty hot. People are plunging in. There is no resistance from above. Upward movement is smooth.
Downside is, that those who’ve been sitting on notional profits might start to book these anytime. When that happens, the scrip might plunge well below your high entry and hit your stop. That’s a risk you have to take, since you have decided to enter above a high.
No risk, no gain.
At my more conservative second entry point, the scrip is not as hot. It is meeting with overhead resistance from recent entrants who entered high to then find the scrip correcting, and who are now happy to exit at their entry points as the scrip retraces its upward move. So, I will have to wait longer for a possible second run of the scrip to develop, and this might or might not develop. That’s a chance I have to take. That’s the price of being conservative during second entry. I’m comfortable.
Staying in your comfort-zone at all times adds a lot of value to the rest of your life, even after you shut down your computer. One does carry over one’s emotions, and it’s best if these are under control when you reach home. By trading in your comfort-zone at all times, you make sure that you come home in an emotionally balanced state.
If you can take the second entry above a high or above a resistance while still remaining in your comfort-zone, by all means, please do so. It’s an exciting play, capable of yielding large and quick rewards. I’ve tried it at times, but cannot get a grip on the excitement levels. Thus, I normally choose the more conservative play mentioned above. It’s just a personal choice.
Similarly, I’m very comfortable checking my ace-high trades down through the river. If I’m in a trade and it’s not running, I don’t jump about trying to pull stuff out of a hat in an effort to make the trade run.
If it’s not running, it’s not running. Feed in a trigger stop and shut the computer.
Once you are alerted that the stop’s been hit, look for a new trade.
Keep it simple. That’s another recipe for winning.