Currently I’m still just on my 1 contract starting position in gold and it’s been good, I’m up about 25k USD on this one trade but I was reflecting on what the results would have been of I had pyramided into the trade every 3% (worked out from my previous two most successful trades on cocoa and coffee) as the number that would have kept me in the game. The difference between the two means I would have made about 111k USD by now, which is obviously significantly more but I would have been really worried about when to take profit because the gains were so strong. The issue pyramiding creates is worry about getting stopped out of the bigger move and questions about where to get off. My previous answers to this question were increase by 1 contract every 3% and stop out if the price drops below the 40 DMA or entry price (or initial stop if the trade was never added to).
The benefit of staying with the inital position is I can sit on it so easily and in another way I need to sit on it so it encourages the right behaviour for capturing a trend. Pyramiding actually creates the opposite behaviours to those required for staying on the trend. I’ll be interested to see how my rules mentioned above would have played out in this circumstance but my goal for this trade is just to sit on the initial position and coach myself to success by doing that. Reinforcing the behaviour and thoughts which will allow me to sit on my initial position until the end of the trend. Have I defined the end of the trend? No. Certainly the 200 DMA would be a marker but I think I’d be disappointed if price came all the way back there and I hadn’t taken profit sooner so I think my market will be something a bit higher such as the 40-day moving average.
I think at this point in my trading the main focus is always stick to the original plan and if the original plan was bad then make a note for the next trade.
So far it has still been a great result and appropriate for where I am at. One of the main mistakes I have previously made is failing to put a context around the result and comparison to the unknown optimal outcome (retro-fitting decisions).
It is also a question of how the change in emotional stability from having a larger position with tighter stop would have prompted me to take my prophets earlier and so change the calculation for the comparison between different outcomes.
I’ve also noticed it is so much easier to coach yourself if you remain with the original plan because either way you have only one thing to change which is the plan for next time. Whereas if you change the plan and then you change your decisions as you are executing then you’ve got question marks about yourself on whether you can follow through on a plan and whether you can be successful. If you follow the original plan every time then all you’ve got to do is get better at making plans.