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Someone wrote me:
> What is your thought on adding to a losing position which has pulled back,
> is
> holding and has not triggered your exit signal.
>
For me, the one position I put on at the beginning of the trade is
enough. I already have a red flag waving in my little heart that says,
'Hey...this is a losing position, here. Better be careful.'
Now, honestly, a part of me is saying, 'It's holding...relax. If it
holds a little longer, maybe I better add some at this 'better' price,
so when it goes up...' But I've found that for me, it's best to stay
with the size of the position I began with and did my analysis on. I
started to write that when a position is underwater, it's a loser and
I don't add to losers. But I also don't add to winners.
There's always been a fallacy in the markets that the people that make
a living trading make *huge* amounts of money as they pyramid and
pyramid their way to riches [And then go off to Gstaad to ski, or to
Palm Beach to polo...]. I make my money one trade at a time. The best
periods of trading for me, as I look back at my trade sheets, are the
ones where I am tune with the markets and take nice, consistent
amounts of money out of lots of trades, not one large trade that makes
me giggle all the way to the bank [As someone pointed out earlier,
those huge profits tend to cause you to lose your discipline as a
trader...].
Again, I want to point out that this is only how *I* trade. I am a
friend of a high-profile trader that builds his entire trading
philosophy on pyramiding. And he can make a great deal of money in a
trending market. I will say, however, that in his methodology, he
never adds to a loser, which means, that even he would answer your
question no-He would not add to his position if the initial trade was
at a loss.
Tim Morge
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