add to a losing positon

Most of the posts here totally misunderstand things. There is no such thing as a "losing position" - once the market has moved against you, you have already lost the money. Your intial entry is a "lost" position, and the money has already gone. You are now in an identical situation to someone who has just entered the market and is currently at even.

The vast majority of bad trading errors after entry occur because people think in terms of where they entered. You should completely forget where you entered, and only judge your exit or adding decisions on the current market situation. All your trading decisions should be based on what you would do if you were currently flat. Forget your current position, just analyse the market as if you were flat, then if you would get long 5 lots here, then you should be long 5 lots, regardless of whether you are currently flat, long 10 lots on a huge profit, or long 20 lots on a massive loss, or short or whatever.

Until you understand that your entry price and current position size has nothing whatsoever to do with what position you should have on right now, you will never really understand trading. Comments like "losers average losers", "never add to a loser", "add to a winner" etc are just so much cliched garbage.
 
There is no such thing as "averaging a loser". All you are doing is increasing your position size. Your losses on the initial entry are not changed one iota by increasing position size at more favourable prices.
 
Quote from Cutten:

There is no such thing as "averaging a loser". All you are doing is increasing your position size. Your losses on the initial entry are not changed one iota by increasing position size at more favourable prices.
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Not true, as a professional, my positions are marked to market daily, so every trade, whether a winner or loser is realized (paid for)at the end of the day.
 
Quote from Cutten:

Most of the posts here totally misunderstand things. There is no such thing as a "losing position" - once the market has moved against you, you have already lost the money. Your intial entry is a "lost" position, and the money has already gone. You are now in an identical situation to someone who has just entered the market and is currently at even.
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I know what you're getting at, and it makes perfect sense obstensibly. But I don't think the situations are identical, for the simple fact that the trader who entered first is mistaken in his timing or judgement -- he bot or sold before (perhaps way before) he should have, and therefore his judgement of the market is off.

That trader who believes in the point you are making and keeps asking himself "If I wasn't long already, would I still buy here?" to rationalize holding on to his losing position is not much different than the trader who believes "If I thought this stock was cheap at 40, surely it must be a better buy at 30! And 20! etc etc" all the way down. This is a somewhat different issue than averaging down, but my point is that an open loser is telling you something that you shouldn't so easily ignore. I agree with you that a trader should always be thinking about what happens next, rather than what has already passed, but to always pretend that we've just entered a position at the current price is taking it a bit too far I think.
 
Quote from spyderman:

Why is it the majority of traders find it so hard to add to a WINNER?
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because they don't hold winners, they cut them short.
and let losers run....
 
I am a short term trader, out within minutes, 1 or 2 days at the most. I am able to make fantastic money following this approach, I can add to my losers and trade out of them, My winners, well, I take profits, no time to let them run as I already have an excessive return in them, to bet on them continuing to move in my favor would not be a good bet.

That being said, I am working on a longer term position model that will attempt to capture larger moves by adding to the trade as it continues to move in my favor. I do recognize that If I get on the right side of a major move I can make one trade that will make my year, and the market will finance the trade.
 
Quote from spyderman:

Why is it the majority of traders find it so hard to add to a WINNER?
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That's one thing I've been trying to work on. And man, that is hard. I dunno why yet, but when I figure this out, it's gonna help my bottom line a lot.

Maybe I need consistant rules about when to add to winners (like when it breaks S&R in my favor, scale more in).
 
Quote from m_c_a98:

because they don't hold winners, they cut them short.
and let losers run....
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sounds like what i've been doing - cut your winners and let your losers run. :eek:
 
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