Under-Funded or Over-Trading?

Any time you trade a plan, you must determine the size of the position you wish to establish. Consider the total size of your position upon completion of your position entering. With Rule 2, we should be twice as large, or more, when you are right than when you are wrong - so be sure to work that into your trading plan from the start.

Anytime a trader does not incorportate a plan to add to winners, they may be under-funded, and unable to margin the additional positions. Over trading on the origional position is actually the problem from the start. If you risk it all on your initial position being correct, you will be defeating the trend-following usage of Rule 2, and are trading like a day-trader.

Remember, it is the nature of trading, and life, that you seldom recall the good effects of proper trading as the negetive effects. 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.

Phantom says "I want traders to ask themselves two questions;"

1. Do you put only part of your expected position on from the initial entry?
2. Are you planning for adds prior to your initial trade?

If the answer to either of those two questions is no, then you must go back and rethink your trading program.