The key to consistent gains is found in designing a set of contingencies for any possibility. No one has a crystal ball to call the market bottom or the top.
Laddering in a position is a new concept we have introduced to our trading and to our website. As members will have noticed, we have recently introduced the practice of gradually increasing allocation as the market gives us the opportunity to buy low over a period of time. The ladder for any given trade can be viewed in the “Allocation” column of the daily signals table. Additionally, new “ladder buys” are indicated with a pink highlighting and the recommended allocation increase will be posted.
Ladder trading is a clever and well-organized strategy used by professional traders to gradually open and enter into risk. Nobody can time the bottom or the top of the market. The act of laddering takes advantage of sell off panic days for entry once we have decided to take a long position. It allows us to buy from amateurs, momentum traders, chart slaves, and hedge funds, when they panic.
Some of our members may be concerned with the increased cost per trade, but commission fees should not be a major issue if you have an online discount brokerage account with costs per trade of $9.00. In general we do not trade that often. The only time cost-per-trade following the signals of our program becomes a concern is when a member’s portfolio size is too small.
Now, you may want to know what happens when we issue a sell signal. The answer is simple: we sell the whole position in one trade. To summarize, we enter into risk slowly and close the risk immediately.
At this juncture we are trying to determine the best method of reporting the results of ladder trades in our “historical trade by trade” section. If it proves beneficial and practical, we will add a more complicated reporting calculation that takes into account the ladder trades and their respective proportional allocations and entry prices. However, for the time being, we will continue to show those results using only the initial entry price as our base for calculations, just as we have always done.