Trading Lessons: Add To A Winner?

When I open a position, I add shares. When the prices increase two times the average true range, I usually add the same number of shares. Okay, that’s correct.

By using this method, I’ve realized that every time I add to the position, my average cost increases while the potential profit percentage decreases. No, that’s absolutely not true. The only reason we’re adding and I think you’re thinking about it incorrectly, quite honestly, because you’re focusing on what happens if the stock pulls back.

You’re not focusing on why we’re adding in the first place. We’re adding because we’re getting positive feedback. There’s no other way to put it right.

We’re getting positive feedback that the stock is moving in our favor. Don’t forget, you would not be adding at all if the stock was moving against you. So the fact that we’re getting positive feedback and we are looking for that stock to continue going, that’s why we’re adding.

It’s classic trading, quite honestly. It is literally the way that big traders have traded since the beginning of the stock market, where you put on a piece, you put on more, and you put on more, and you put on more as it moves in your favor, because you never want to be exposed to overnight positions full share size without getting some positive feedback from the market. So you’re focusing on profit percentage decreases.

That is absolutely incorrect. Absolutely incorrect. You are basically saying as soon as I add, the stock can’t go up anymore.

That is completely false. And there’s so many stocks right now that will prove that mean even some simple stocks right now, it doesn’t even necessarily need to be SMCI, which is one of the stocks that has had by far the biggest gains this year. And you can see here, you just keep adding.

And this is a $100 move after breaking this move. So at what point is it no longer the right thing to move? It added here on this pause. You add on this pause, and it’s a $100 know, we’ve just recently had UPST break out and follow through.

Breakout and a pause. A breakout and a pause. A pause, a pause.

So I think that you’re thinking about the wrong side of the trade, because when you start to put the profit maximizer in here, you are literally look at this here. This entire move was still valid up until that point. This entire move is still valid.

So I think that you’re focused more on you’re afraid to lose money as opposed to thinking about what happens when the profit maximizer gives you extra profits. That’s the whole point. So I just think that the point of view that you’re looking at it is you’re afraid of potential profits vanishing instead of focusing on the fact that you got positive feedback.

Is there a chance the stock could pull back? Oh, my gosh. Of course you could say that with any trade, but you’re not adding unless you got the stock to move in your favor in the first place. So I just think that you really need to think about that differently.

And also, let’s just talk about this because we mentioned last week that you really need to decide what kind of trader you want to be.

And if you’re not comfortable with letting winning trades run, and every time we get a small pullback or when you add and it slows down, you’re thinking about losing money, then probably you shouldn’t be adding.

Quite honestly, if that’s the way you’re thinking and you’re limiting what the stock can do, I would actually suggest that you don’t add, because the only reason we’re adding, let’s not forget, is this, because it’s doing exactly what we want it to do.