As important as it is to be able to manage your trades properly, it is equally important to have a money management system for your trading. This includes knowing when to trade small and be picky, as well as when to trade big and be aggressive.
For me, there are 3 occasions when I trade aggressively:
Trade aggressively when you’re ahead. Losing streaks in trading call for trading less frequently and cutting down position sizes. It only makes sense, therefore, that profitable times are the best times to press and get bigger. Profits come as a result of being correct in your trades, so capitalize on being in sync with the market by increasing your size. When you’re seeing things clearly and gauging momentum correctly, take every signal you get. Trading bigger and more often when you’re ahead will allow you to make much more money when you’re right than the times when you’re wrong.
Trade aggressively in the midst of a clear trend. The market doesn’t trend all the time, making it important to be able to recognize an uptrend or a downtrending stock.
Trade aggressively when good setups are plentiful. When there’s a lot of good chart patterns showing up in your stock screens, it’s usually because the market is giving a stronger indication of an impending move. When a sector or the market in general is on the verge of a breakout, it can be tough to determine which stocks will be leaders in the next move. This makes it important to enter more positions than usual as good chart patterns confirm. You may wish to trade on margin to accommodate the additional positions during such times.
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President, The Stock Bandit, Inc.