Cash Management

[AAAintheBeltway]

I agree with Vikana: only buy when you think it is headed up. Scaling in as a stock drops is a play for extremely large size institutional buyers who have to buy when there is supply. There is one exception for traders with iron discipline. Put on your standard position when you think it has bottomed or is at support, then if it drops to your stop loss point, double up. If it drops even a tiny bit more, exit everything. If it rallies to where you are b/e on the entire psoition, get out. Only use this in extremely liquid stocks or, ideally, the futures. The beauty of this is you are risking very little on the add but the position only has to retrace half what it lost for you to get a push.

 

[LelandC]

I have been tossing around this idea as well lately. Do you put on your entire position at once or test the waters so to speak and add when it confirms your thinking? Not really sure what the right answer is. I do know that when you are paying per ticket (fees) scaling in and out can really add up if you are trading a couple of thousand shares. Probably best to put it all on at once and scale out....

Leland

 

[vikana]

Originally posted by LelandC
I have been tossing around this idea as well lately. Do you put on your entire position at once or test the waters so to speak and add when it confirms your thinking? Leland

I generally buy everything at once and scale out. It's imperative that you get a broker that only charges per share (no tickets). I made many expensive mistakes when I was thinking about ticket charges in the past. Since switching to a per/share commission schedule those issues have all disappered.

 

[Don Bright]

If you're not sure whether you want to buy(or sell) the whole number (whatever units you're used to trading)...then don't do it at all. Scaling out is "ok" - but even that is not recommended.

Many "test the waters" by throwing out 300-400 shares between the markets to see if they are "gobbled up" and then hit the bid or take out the offer with 4,000 shares or so.