Increasing one’s investment in losing positions allows traders to "average down" their entry price, with the hope that the asset will eventually align with their trading strategy.
However, this approach is not universally applicable.
It is essential to recognize that there are no guarantees that the asset will ultimately move in your favor. Can you maintain sound trading judgment if the price continues to decline?
Fortunately, there is a method to determine when it might be appropriate to consider adding to a losing position:
Pose the question to yourself, “Is this action consistent with my trading plan?”
If your response is affirmative, indicating that you anticipated the price could reach these levels and you are committed to your strategy, then proceed with confidence. Adhere to your trading plan and seek the desired outcomes.
Conversely, if increasing your position entails risking more capital than you initially intended, or if your motivation is merely to avoid acknowledging a loss, you may be relying on mere hope.
This approach is akin to those who depend on hope in various contexts, whether it be in romantic pursuits, optimistic narratives, or gambling scenarios.
Relying on hope obscures your perception of the prevailing market conditions and fosters an unrealistic expectation that the market will reverse in your favor.
Hope alone will not enhance the probability of a successful trade, nor will it safeguard your trading account.
Instead of succumbing to hope, direct your efforts toward evaluating whether it is prudent to accept your losses. Reflect on how to mitigate similar losses in the future and seek trades with improved potential outcomes.
Keep in mind that numerous trading opportunities will arise, but you will not be able to seize them if your account is depleted in the quest to validate your initial decisions.
Categories
Articles
News
Investors Digests
Main Courses
News
Strategies
Indicators
Guides
Workbooks
Glossary
Lessons
A Glossary
B Glossary
C Glossary
D Glossary
E Glossary
F Glossary
G Glossary
H Glossary
I Glossary
J Glossary
K Glossary
L Glossary
M Glossary
N Glossary
O Glossary
P Glossary
Q Glossary
R Glossary
S Glossary
T Glossary
U Glossary
V Glossary
W Glossary
X Glossary
Y GLossary
Z GLossary
Recent posts
Zilliqa (ZIL)
26 Nov 2024
Zcash
26 Nov 2024
Yield Curve
26 Nov 2024
