Quote from SteveH:
Black Noir,
If I were limited to giving you only one piece of advice in trading it would be this:
If your intention is to trade strong trends, then you want to be holding the smallest number of shares/contracts when you enter the trade and holding your largest size when you exit.
Now, when I say this I mean that your initial risk with NEW capital is only on the initial entry. Any subsequent add-on point will be taken in a way to where the current price action will NEVER BE ALLOWED to go against you past the point of a scratch trade.
If you trade this way, then you can survive at this game full-time with only a 30%-40% winning pct because each win will cover far more losses because your avg loss is kept constantly small while your winners are 3x to 40x more than that (assuming we're talking about trading the e-minis).
I'll bet 90-95% of the at-home e-mini traders out there start each trade with the largest position they ever plan on taking in a trade and "peel off their contracts" to "lock in profits". All this effectively does is to put higher demands on your winning pct. because this lowers your avg win / avg loss ratio (aka payoff ratio).
No one ever would have heard of Larry Livermore (and for that matter, "Reminiscences of a Stock Operator" wouldn't have been written) had he traded like the run-of-the-mill e-mini at-homer. He was great because he started each trade relatively small and leveraged up as the trade continued to go his way. As the book stated, when he was on his game, he was 7 out of 10 in his picks. Getting a 70% winning pct. in leveraged-up trading is how you get rich. This is the exception, not the rule. Getting a 30%-40% win rate still affords a nice lifestyle with much less stress, imo.
