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I don't pyramid. I also don't enter the ocean one foot at a time... just my
personality. When I'm ready, and I've studied the waters, I get myself
totally immersed but QUICK!
It works in the water because all fear and hesitation is eliminated
immediately.
I believe it works in trading for me for the same reasons. Since my mind
knows I'm not going to play around and doubtfully test whether I'm right or
not, I'm forced to pay close attention and make confident decisions, or stay
out of the game entirely.
I'm also forced (from the pain of experience) to carefully prepare my exit
strategies BEFORE I get in. as well. This means deciding where my stops are
going to go if I get filled at "A" versus "B", etc., and what my profit
targets are. Basically, I go through a huge amount of "what if" scenarios
rapidly for each trade. Will I use trailing stops, or scalp a quick spike
with a limit-out? If it runs quickly to a certain pivot, will I re-adjust
my stops or targets... and how quickly is "quickly"? What if a
corresponding market (an index like the S&P, or the NASDAQ Futures compared
to Microsoft, or the Gas & Oil Futures compared to Chevron Oil Company
stocks, for example) does something radical... what then? Do I want to use
contingency or MIT orders... and do I base them on the asset themselves, or
a bigger indicator like an index?
I know this isn't for everyone... and lots of big money pros really prefer
the scaling in or out approach (especially with larger amounts of capital to
build a position.) But unless you are trading in the 7 figure range,
scaling and/or pyramiding is definitely NOT mandatory to beat the floor,
like it is for the big boys.
Also, a lot of the seminar teachers/traders who count on making money by
happy customers teach pyramiding/scaling because it always APPEARS to be
easier and lazier to ease your way in than to spend the appropriate time and
focus in preparation. How do I know this? I use to be one of them, and
I've worked with several of the "best." I'm definitely NOT knocking the
elimination of risk... to the contrary; appropriate preparation and strategy
will greatly reduce and manage your risks. The key is knowing how to act
decisively and POWERFULLY when opportunity arises... because if you try to
skinny-in on a quick opening, it'll close right on your body part!
My attitude comes from playing Offensive Center in junior college football.
As National Champions, we were 9-2 one year, and 10-1 the next. My coach
always taught us to be so prepared and strong that we could look the defense
in the eyes, TELL them the play we were about to run, actually run it
exactly as we said, AND BEAT THEM ANYWAY!!! It wasn't about guts, or
foolish machismo... it was from relentless preparation!
Again, one of the most important lessons to learn of profitable trading is
when NOT TO TRADE. If you're not sufficiently prepared to play, do not take
the field! There's always the next 3-5 minutes, or the next hour, or
tomorrow, or next week. Trader's opportunities are like busses, miss one
and there's another coming along any moment now. (Specifically like busses
in L.A.... there will be another or several along any moment, but you can
never expect them to be on time!)
A big answer to a short question... hope you didn't mind.
Profit Powerfully,
Dave Donhoff
-----Original Message-----
From: CONTrader@xxxxxxx <CONTrader@xxxxxxx>
To: deltaforce@xxxxxxxxxxxxx <deltaforce@xxxxxxxxxxxxx>
Date: Monday, August 24, 1998 2:14 PM
Subject: Re: Option Strangles Vs. Entry Strategies
> do you use options to hedge while pyrimiding (if you pyramid)?
>
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