Question:
Hi, I love your site and it´s been very helpful to me. It helps me remember that in trading you never stop learning, and you should always stay alert, for sometimes one’s worst enemy is oneself.
Here’s my question / problem: lately, I have made several good trades, entering around the right time (although I need to work a little more on that), but I can’t manage to add to the positions once I see they’re confirming their way up.
So now I have 5 positions open, all with a profit, but the real amount of profit is small because I only put in play about 1/3 of the money I intended.
I am also using trailing stops based on technical levels to protect my gains. My style is swing trading.
I know I’m suppposed to wait for a pullback to add to positions, but once it happens, I am afraid the price is going to touch my stop, so instead of adding I freeze.
On the other hand, when the price is going up for several days, I also freeze because I feel it’s overextended and not the time to add.
Conclusion: I never add and my positions are always tiny. How could I solve this problem?
Thank you very much and congratulations on the site.

Bella Responds

This is excellent work identifying an area for improvement.  And even better how specifically you have hammered down to your issues.  I love that you are seeking a solution to improve this aspect of your trading. Very well done!

Ok so since you a regular reader of our blog you know the solution coming will require work, practice, tweaking, and daily improvement.  As for buying pullbacks of strong stocks, develop a system for you to add into a pullback that makes sense to you.

The easiest pattern for me to add to is this:

1) strong move away from an important technical support level

2) shallow pullback

3) protection if the trades works against me

4) lots of room to the upside

5) strong buying that I can identify on the tape

6) significant news catalyst

Start with the easiest pullback trades.  Find a stock in a clean bullish flag pattern, that has not pulled back much, and offers a tight stop if you are wrong.   Add to this position.  Set your stop.  Stop focusing on the result.  Just execute.  You cannot control the outcome.

Is there another pattern that makes sense to you for adding to your position?  If so then add to positions with this set up.  Focus on your execution, and controlling your risk and not the result.

You are searching for patterns that make sense to you to add to your winners.  You are not looking for trades where you definitely will make more money.  You are finding patterns that in this market if you add on a thousand trades your risk/reward will be excellent.

Think about making good trades instead of making more money.  Think about developing a playbook that makes sense to you to add to winners.

This will be a daily process for the next six months.  Get better everyday.  Journal and talk with others.  If you get better everyday then this is excellent work.

Mike Bellafiore

Author, One Good Trade