Entering a position, # of contracts

[fandyur]

I am a position trader.
4 contracts would be what I normally trade.
I have been entering 1 contract at a time and adding
to it as my position becomes more profitable.
Is this the best way to do it.
I trade with the trend.

 

[arabianights]

It is a very good way of keeping your risk:reward ratio extremely favourable. For this reason I use it in trending markets.

I wouldn't say it's the "best" way to do it though, there is no "best".

 

[donaldduke]

I am a position trader.
4 contracts would be what I normally trade.
I have been entering 1 contract at a time and adding
to it as my position becomes more profitable.
Is this the best way to do it.
I trade with the trend.

This is the way recommended in Reminiscences Of a Stock Operator (although i think Livermore recommends 5 levels, not that it makes a huge difference between 4 and 5).

Its also the way the turtles did it:
https://www.bsp-capital.com/documents/turtlerules.pdf

 

[meanreversion]

It's also the style as suggested by Turtle trading. In effect you are creating a payout similar to that of a long option position.. in the beginning you are a little long, and as the market moves further in your favour, you add and thus become longer. It's the style I use as well. You're only testing the water with your first trade, but as the move develops you add to it.

It won't be profitable in range bound markets though.

 

[fandyur]

Thanks.
Do any of you trade the Eurodollar?

 

[arabianights]

yup... not a very good week so far for that kind of tactic though - you'll get topped and tailed - you're better off sticking to a level to buy and a level to sell in the current market.

It will change of course, probably quite soon. Tomorrow after centtral banks is a plausible time, as is after NFP. Then hopefully we get trends again.

FWIW my week so far I got topped and tailed yesterday and the day before for nuisance losses anticipating trends that never happened; today revertred to rangey trading and did ok.. Just about even on week now I think.

 

[arabianights]

Oh, and of course I'll plug the chatroom in my sig - few ED traders there although no one who speciallisies in it...

 

[meanreversion]

Buying/selling breakouts has been a bit ouch this year, but another way of trying to get on board a trend is to look for rallies to sell in a downtrend or dips to buy in an uptrend. If you also operate the standard breakout trading on top of that, you're sure to catch a move when it finally happens... but still, 2010 so far has not been a good one for longer term trend systems.