[idaxtrader]

Press your winners correctly without exception.

Without a correct method to press your correct positions, you will never recover much beyond your losses. You need rule two to ensure you have a larger position when you are correct. You always want a larger position when you get a great move or trending market than when your position isn't correct.

"Correctly" in Rule 2 means you must have a qualified plan of adding to your position once a trend has established itself.

Rule 2 is important for it keeps you in a good position as well as impresses upon your own thinking about having a correct position nitially. Most traders are conditioned to want to take a profit to prove to themselves that they are right. Being right does not, in itself, make the most amount of profit.

Also a good reason for adding to a winner is because traders usually tend to doubt the position unless they reinforce the correctness of that position. Adding to the position correctly best does this.

The other good reason is that you must be larger when correct on a position than when your position is wrong.

Correctly adding to a proven position must be done so that a pyramid isn't established that will hurt the trader in a minor reversal. Each add onto an original position should be done in smaller and smaller steps.

This is a 1:3:2:1 ratio in establishing three levels of positioning. Initial=1 unit Add1= 3 units Add2= 2 units Add 3: 1 unit

At all times during the trade it is important that Rule 1 be in your plan. This includes when you are adding to your positions to protect your trade from any major reversals, which often happen.

Without exception the rule indicates it is not an arbitrary decision on the trader's part whether to add.

Reviewing Rule 2, it states only that you must add to correct (proven) positions and that it must be done correctly. The rule does not tell you how to add, as this is your requirement in the trade plan you develop. The rule makes no exception on adding to correct positions. The intent of Rule 2 is twofold: Reinforce your correct position both mentally in your thinking and your execution and increasing the size of your position.

One correct way for a day-trader is to see that the position is proven correct and then add at a proper retracement. This will not be the case for a trend trader. A trend trader would most likely have at least one add at a breakout.

Day-traders will have a problem with Rule 2 unless they position properly and understand that their adds must only be made correctly.

Adding correctly regardless of your time period is useful in making bigger gains in the long run.

I use to watch a very good trader put a big position on and take it off until it proved to be correct. He made good trades and ended up with bigger gains by doing it that way than by adding after being proven right.
The drawback is that you are larger when you are wrong, too, but it's still a protected position if you use Rule 1 properly. It is acceptable but, again, I must remind you that Rule 1 is critical here. It looks like a modified Rule 2, but as I stated, your trade plan determines your method of adding. It is understood that you want to
have a larger position when correct. This is a way to do a trade when you don't have an established trend and the probabilities are lower.

You must start your trade plan with rules created to protect your equity. I am presenting those rules to incorporate into your plan. Experience has proven these rules a necessity in survival and reaching your objective of making the most return with the least amount of risk.

Why is it that Rule 2 doesn't seem to work for most of the traders? One simple fact! That fact is they are putting their entire position on at their entry into a market. This is not Rule 2's intent. A total position is a series of positions until the complete expected position is established. They should only have their entire position established upon getting the move as expected. Rule 2 addresses this expectation.

The nature of trading is that more often you see a negative effect from what you have just done. Seldom do you see or remember the good effects from the proper trading as often as the negative. This will leave a plan to add to winners on the back burner when it is time to add unless you fully understand the need for this rule.

Any time you plan a trade program, you must consider what size position you are looking to establish. If your position, as mine often is, is that you will have a total of six units upon completion of your position entering, you can have a better idea of what you must fund. You need to be able to fund the position properly from the start.

I believe most traders want to have a certain size position, and that is the position they place from the start. This is not a correct way to allow you to use Rule 1 and definitely Rule 2 properly. When you see an expected move from the start of trading, your thinking is counter to ever adding in the first place.

I want the traders to ask themselves two questions: "Do you put only part of your expected position on from the initial entry? "Are you planning for adds prior to your initial trade?" If the answer to either of these questions is no, then you must go back and rethink your trading program. I have said it before. If you can think it, you can do it. Perhaps the traders aren't thinking it to begin with because it certainly is not expected thinking without the proper planning.

The fact that reinforcing a correct position actually keeps you thinking correctly is one of the important reasons for Rule 2. Another aspect is that, of course, you will be with a larger position when you are correct.

By incorporating Rule 2 in your game plan from the start, you will be eliminating the desire to be proud when the market moves your way and want to take profits to show that you are right. Traders love to be right.

This is your enemy . . . to love to be right. Your motivation must be to love to do the right thing in trading by either reinforcing correctly your position or removing it should it not prove to be correct.

You will become the best trader you can be by being wrong small, not right small! Get that in your mind now. You are going to have to press your winners if you really consider yourself to have the ability to make a living or extra income from trading. Otherwise, face the truth that you are only playing to break even.

My point was that you must make bigger money on your good days and not just the same amount of money you lose on your bad days.

You must understand that you are not the one who will determine your market position size. It is going to be the market and must always be the market. Rule 2 is going to tell you to put a complete plan into effect before taking the initial position.

You must at all times be able to put only a portion of your expected position on at entry and be able to at least double your size somewhere along the route of an expected move.

You have all heard that you should not add to a loser! Well, Rule 2 takes care of that from the start by keeping you with a smaller entry position in the first place. You never have your entire position until you are getting the move you had expected.

I am giving you a rule that not only makes you larger when you are right but keeps you smaller when you are wrong from the start of a position. I am also giving you a way to not over-trade. It is up to you to make sure you are properly funded to make this step an important one in your favor.

What I want them to understand about that point is that they will only get bigger when their criteria in their
trading program tells them it is time to add. They will not add just because the initial position has been proven correct. When they have completed their adding of additional positions, then and only then should they have their entire expected position established.

Most of the time a trader does not think about the reason for adding because they have their initial position on from the start. This is their maximum risk from the start. That is never what you want in trading. You must take some risk but never your maximum. That is exactly what they are doing if they cannot plan for added positions along the way.

To want to have a correct position from the start is over-trading when you place an entire position. Traders don't add because they have their position. The big drawdown is that when that original initial position is wrong, their losses are as large as their gains seem to be if they were right. We don't want that.