Entering a position, # of contracts

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.

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".

fandyur said:

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.

Click to expand...

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

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.

Thanks.
Do any of you trade the Eurodollar?

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.

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

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.