Adams option blog has an entry about a trade gone wrong (link search for AMGN). It almost the opposite of the way I trade. In the blog, the trader buys some calls. When the stock moves against him, he buys more calls. Still more pain, more calls. So much capital is put into one bad position that it will take 12 consecutive winners of the size of the original AMGN position to get out of the hole that has been dug.
Sound money management is at least as important as any indicators to get in or out. A person that doubles down again and again will run out of luck. It is one thing to take a half position or quarter position, with the plan to buy the other part on further weakness. It is another to refuse to admit that you are wrong and lose big on one idea.
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