Many traders, especially those new to the markets, have a habit of “averaging in” to trades that aren`t going their way. The following reasoning is used: If this trade was a good entry at my earlier price, then it must be an even better entry now! On top of that, the trader gets caught up in the idea of improving his “average entry price.”
Unfortunately most traders learn the hard way that this logic simply does not hold up. This is a natural response that everyone has, which is exactly why it doesn`t work in a market. The reasoning that “this trade was good then so at this price it must be even better” is based on the flawed assumption that the first entry price was a good one.
Pride tries to keep us from realizing that the very fact that the position is a loser right now is PROOF that the first entry was NOT a good entry (at least not yet). In fact, the stock or option has moved in the opposite direction the trader thought it was going to move, indicating that either the analysis/reasoning used to take the position in the first place was incorrect or at the very least the reasoning has been weakened by the market action since the position was established. This does NOT mean that the trade is no longer a good one just because you did not make your initial entry at the perfect moment (who does?) — it just means that you probably shouldn`t be willing to put more capital at risk now that it has started to prove you wrong.
The other part of the reasoning, that “this will improve my average entry” is simply a mathematical illusion.
By “averaging in”, you don`t just move your entry closer to the current price (the part Pride makes us focus on), you also double your losing position (the part we don`t want to see). Instead of 1000 losing shares at 10.25 you now own 2000 losing shares at 10.00 — BIG DEAL — you are still down $500 because the stock price is still at $9.75 and now you own 1000 extra shares of a stock that is in a downtrend instead of the uptrend you predicted!
Don`t get me wrong, it is not always a mistake to increase your position on a losing trade — some circumstances (such as the stock sitting right at a very strong resistance or support level) warrant it. If you absolutely must add to a losing position, always do so with the conviction necessary to exit the ENTIRE position quickly should the trade move against you (through that critical support level you saw, etc.) from there.
On the flip side of the coin is the exact opposite reasoning and the exact opposite results over time. Adding to winning positions is a practice rarely done by even the most experienced traders, but one that can lead to increased profitability over time. This is exactly the strategy that our Day Trading Systems have used successfully since 2000. The next few times you hear pride telling you to “lock in your profits”, double your position and set a stop at your new “average entry”. After 5-10 of these trades you will be surprised at what a profitable (and a confidence building) method this can be.
Once again, traders who ignore pride and trade the opposite of emotion will reap extra profits and a much more pleasurable trading experience. DON`T MISUNDERSTAND ME — you will not profit more every time you add to a winner and you won`t lose every time you add to a loser — I am talking about trading strategies to work OVER TIME — anything can happen in the window of a few trades.
Andy Swan is co-founder and head of trading at DaytradeTeam.com
City Wide Garage Sales: Most of us remember going to at least one garage sale in our lives. It may have been called a yard sale, garage sale or flea market. The name didn’t matter it was all the same. Other people selling what they thought was trash to people who thought the items were treasures.
Those people who find treasures are the people who feel euphoria at the sight of garage sales. These people need to look at these garage sales in a new light. You can take this overwhelming urge and profit from it in several ways. You just have to find the way that suits you best.
Before going too far in this endeavor, check with your local government regarding laws and regulations of garage sales. Some places state that if you have more than a certain number of garage sales, like more than five, you have to claim all money made as income. Other places have no stipulations and regulations.
Once you have this knowledge, it is time to start. You may want to ask some of your friends who also enjoy going to city wide garage sales to join your adventure, or you may just want to keep it solo. The choice is completely yours.
Start by cleaning out your own home. As you go though it, price each piece. Place all the items together in one area. By pricing the items now, you will save some time later for your city wide garage sale.
Call your local newspaper and place an ad to run on Thursday and Friday. Make sure you state in the ad the date, times, location, and any specialty items you have. Always set the time for 30 minutes later than you actually want it. This way the people will start arriving when you want and not 20 to 30 minutes before.
The day before the city wide garage sale, put up signs around the main roads in your community. Make sure the poster board is a light color and that you use a large tip black marker for your lettering. Include the times, date and address of the garage sale. You may also want to preset your items on tables and hanger in the garage for a quick start in the morning.
During the sale, hand out flyers announcing that you will be having other garage sales at intervals. Mention that new items will be for sale at each of the city wide garage sales. Hopefully, your customer will tell other people about your upcoming garage sales too. You can take the remaining flyers and put them in local stores and community bulletin boards, just remember to always ask first.
When the city wide garage sale is over pack up what is left and place it in a designated area. Take down your signs and count your money. Take the money that you initially put in for change, and then take change out for the next sale. Use the remainder to purchase more items at city wide garage sales in the weeks between your garage sales. Mark the new items as soon as you get them home, and place them with the rest of the items. Repeat this cycle as often as you like.
Another option is to rent space at a local flea market. Many people do not like to do this because of the need to haul the items back and forth. However, if you live in an apartment or in an out-of-the-way area, this may be the perfect solution.
You can also have online garage sales. In this instance, you sell the items as you wish, and can continue year round. There is no getting up early or setting anything up and taking it down. It is almost completely virtual.
Many garage sales online have blossomed into online auction sites, such as Amazon.com and eBay. There are printed books, e-books, periodicals, and classes to teach you how to make money on these sites. These virtual online garage sales can be done at anytime of day or night and anytime of year. Online garage sales may be the wave of the future.
Whichever you decide to do, or if you decide on a combination of the two types of garage sales, you will always have items to sell. City wide garage sales are constantly going on in some area, but auctions, estate auctions, and thrift stores are also good hunting grounds for items to sell on your garages sale online or in your front yard.
It is a little work to get it started but the more you do the more you will understand the mechanics of these sales, what sells and what doesn’t, and how much to ask. In no time, you will be making money in your front yard and online garage sales.
© Copyright Randy Wilson, All Rights Reserved.
Jackpots Explained
WWW bingo is now becoming more and more popular in the UK and elsewhere. After the public smoking ban, a vast number of old-style bingo halls went under; this has needless to say initiated a vast number of companies offering web based bingo as a substitute. Movie stars’ validations such as that by Sharon and Jordan Osbourne and others have also been beneficial in pushing the fashionability of world wide web bingo; embracing almost about 2.5-3 million fans presently enjoying a recurrent game at their computer.
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If your friends are making use of a given web based bingo website, you may want to consider joining them as networking may considerably add to the overall amusement.:)