The recent post addressed the number of adding to trades next adverse movement. Here is a trading imitation pas that has toll me inwards the past: I don't add together size to a merchandise that's inwards the red, merely I convey added *time*.
In other words, a merchandise volition deed a flake my way, as well as thus a flake against me, as well as thus dorsum to scratch: dorsum as well as forth for a while. Often this occurs inwards tedious markets.
Normally, my merchandise ideas include an gauge of time: I should encounter the marketplace position deed my way inside a thing of minutes from my entry. If that doesn't grade off as well as I remain inwards the trade, it's been a pretty skillful predictor of a losing trade.
One argue for that is that adding fourth dimension is similar adding size: it increases the variability of returns. If I plow a short-term merchandise into an intraday swing merchandise or an intraday swing into an overnight hold, I've effectively added to the size of the trade. Instead of adding adventure on a promising trade, I'm adding it to 1 that has fallen brusque of promise.
Equally important, every merchandise sentiment amongst a target as well as fourth dimension frame is assuming a item degree of marketplace position volatility. If the merchandise has non moved much inwards the allotted fourth dimension frame, it agency that the gauge of volatility may last off, which inwards plow suggests that marketplace position participation has declined. Again, this is hardly a skillful argue to add together risk.
Some of my worst trades occurred when short-term trades turned into miniature investments. You don't convey to add together size to a losing merchandise to add together risk; inwards the marketplace position fourth dimension *is* risk.
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