A consistent concern I get from less-experienced
investors is: "Should I add futures trading agreements to my current
industry position?" That's a wide concern and there is no individual right
response. So, let's separate down the concern into some circumstances.
First, if your software system involves the
"scaling in" to a dealing place, then such as to an current place
would be recommended. For example, let's say a investor programs on coming into
a lengthy soy bean company with three agreements. His first "leg"
into the company may be at $4.40, and the second "leg" at $4.60 and
his third "leg" of the company would be at the $4.80 stage. Thus, if
the industry activity performs out the way the investor predicted in his
preliminary software system, he would be such as to his current place twice.
Again, this investor is attaching to his preliminary software system.
Let's look at another scenario: A investor goes into
a lengthy soy bean futures trading company at $4.40, and he has an benefit
purpose of $4.80. That is his preliminary software system. However, when costs
hit $4.80, the common sensation among the "soybean marketplace" is
that costs will monitor still higher--possibly much greater. The investor
chooses that instead of either putting a very limited following offer quit or
getting out of the company (as was his unique plan), he will add a several more
agreements to his already-profitable position--even though he did not have this
concept in his unique strategy of dealing activity. This is not a recommended
way to company. Reason: The investor got found up in the sentiment of a
favorable run in the soy bean industry. He got selfish. Feelings can eliminate
a investor. This is why dealing programs should be stringently followed. Don't
let the increased emotions of being "in the market" effect your
dealing choices.
The one sentiment that can easily take a individual
out of the amazing company of dealing futures trading is avarice. In the last
dealing situation, the investor who desired to add to an already-profitable
place was presenting avarice. It was not enough for him that he could take a
$2,000 revenue out of a single-contract company (as predicted in his unique
dealing plan). He desired more. It's this type of reasoning that many periods
causes dealing damage.
Most expert investors acknowledge that such as
agreements to a dropping place is a occur. Trying to "average down" a
dropping company should NEVER, NEVER be tried.
One more aspect to consider when such as agreements
to an current position--even to a successful one--is that a shift against you
is now increased by the quantity of agreements you just included. While this is
likely easily obvious to most investors, what is sometimes skipped is the
rapidity at which income can escape when more agreements are included to an
current successful dealing place and the industry then goes only reasonably
against you. You may reduce all of your unique profit--and then some--including
getting a edge contact.
Finally, many recommended investors of several
agreements in one place will actually company less agreements as their income
collect. For example, let's say the soy bean investor who had three
"lots" (contracts) in the example above is constantly collect income
as costs increase above $5.00. He may then begin to "scale out" of
his successful company by promoting one lot at $5.10, and then one at $5.20,
and then maybe he will let one more lot "ride" with a limited
following safety offer quit.
