Monday, 1 February 2010

Learn To Trade: Your source for investment or investments, stock, stock market, and stocks info

Learn to Trade: In London, I was speaking to Tom Hougaard, a professional trader, at a seminar in October about trading. He told me that one of the hardest things to do is to add to a winning position. But when he learned how to do this and go against his natural instinct, It allowed him to profit handsomely in his winning trades. Essentially, I am talking about what Is called “pyramiding” or “adding to” a winning position. I myself am not a particular proponent of this method. I think the strategy definitely has some pros, but the cons are what I don’t like about it. Pyramiding a stocks upwards can be extremely profitable IF the stock continues in an uptrend. Where things get tricky is if the desired uptrend fails or the stock is whipsawed up and down and you are taken out of the position because of a stop order that is too close. My gut instinct tells me to follow the advice of legendary trader, Jesse Livermore, who says, ”Pyramiding is a dangerous activity and anyone who tries it must be very agile and experienced, for the further a stock gets extended in its rise or decline the more dangerous the situation becomes. I tried to restrict any serious pyramiding to the beginning of the move. I found it not wise to enter a pyramiding action if the stock was far from the base.”

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