Average down - small wins, big losses?

[tomorton]

It depends on how you are monitoring market information. Context is a key differentiator.

The easiest to see is the shift in volume demanding liquidity occurring within the shadow of the previous trend. PB’s are within the shadow, reversals starts there and then are categorized depending on timescale of perception. All reversals show themselves on the fastest timescale first as the Dominance of sentiment shifts from oscillating to an offset then back to oscillating but now in a new direction.

Search for the 5x5 grid drill which breaks it down to perceiving the above as ‘legs’ on a bar.

Lots of terms I have never heard of before. Though I have heard of volume: I don't ever consult volume figures but people who do say its just as open to interpretation as price action. Hard to see this as an objective criterion for pull-backs v's reversals. Circumstantial maybe.....

As for something being in "the shadow of the previous trend", I don't know what that is but again it seems hard to say this is an objective measure if it doesn't have an objective definition itself. You'll have to say more to be convincing on this.

Maybe you have some examples please?

 

[schweiz]

There are objective ways.

Can you explain these "objective ways"?
And there will also be "objective ways" to do just the opposite of what you tell. Adding to a winning position looks more objective then adding to a loser.

And scaling into a winning position can just as quickly turn into a bigger losing position. scaling in to a winning position does not necessarily mean you have the direction right.

Well, at least at the moment when adding to a winning position the direction is right. The proof is the fact that it is a winning position. Adding to a losing position is always happening when the direction is wrong. The proof is the fact that it is a losing position. So the odds are always in my favor. I can still get out at BE, you not as your position is already in a loss.

(and most traders cannot mentally enter right off the bat again in the opposite direction they were just in or even in the same direction they just got whipsawed out of).

For a trader who gets out at BE it is easier to take a new trade then for a trader who just took a big loss that became even worse after adding to the losing position. The loser has a bigger mental issue then the trader who got out at BE. Except for traders who have no brain.

The whipsaw argument is valid for you too. Or does adding to a losing trade make you immune for whipsaws?

 

[ironchef]

It depends on context. A position that is a losing one but is increasing favorably from the point of max drawdown is distinct from a losing position that has not achieved an informative level of support/resistance in the OOE.

What one uses to establish a fundamental perception of value is not as straightforward as one would expect. Estimates are as close as speculators can get. Estimates are varied, a mix of the un-informed and informed.
The discernment necessary to know the difference is as close to a ‘holy grail’ as one could train themselves to perceive.

Appreciate your reply.

 

[volpri]

Of course I can be a bit off too. Nobody's perfect. It is not about how high the winning % is.
But if I am off 3 points ES I get out. I don't average down. 3 points means the direction is wrong. Many times I already get out (or reverse) before the 3 points are reached as I see very quickly if something is going wrong.
Next step is then: I go short or I go long again on a better level.
Much safer and more money then averaging down.

The sample below shows that you NEVER can beat me with averaging down as long as the PB is bigger then the slippage and commissions.And you will always have a much bigger risk.

View attachment 181407

Hocus pocus math...armchair ivory tower theorems that work in the classroom but not in the real world. Nigh close to ponzi scheme math...hypothetical ideas seemly based on logic. Problem is; the market is not logical nor does it care about math. It is dynamic entirely. It will do whatever it wishes to do, when it wishes to do it, and how it wishes to do it, regardless of any logical rules we may devise and employ to influence it....AND if we are fortunate we only get hints.

The math has unproven asumptions. I actually desire and want a deeper PB, of at least 3 points to make it worth scaling into. ALL trading based solely on math will sooner or later belly up. ALWAYS. The premise is wrong to begin with. Quants..algos..hft's will never beat the market but only for a season, at best. They all fall to the wayside. Always will. But he who understands market dynamics plays and plays and plays over and over again. The dance never ends.

 

[d08]

Averaging down just doesn't work. I say this as someone who practiced it for 3 years. Averaging up does work but the application needs to be precise.

 

[Zodiac4u]

Averaging down just doesn't work. I say this as someone who practiced it for 3 years. Averaging up does work but the application needs to be precise.

Lets be serious do8, don't you think that would depend on the signal your taking and the market your trading?? Not all of us blindly buy or sell just because its going against us, right?

 

[lawrence-lugar]

Averaging down just doesn't work. I say this as someone who practiced it for 3 years. Averaging up does work but the application needs to be precise.

I agree, d08
Everything about the market is based...solely, exclusively...on your ability, or lack thereof, on Timing.
It's all about that proverbial crystal ball.

Averaging down, or playing weird spreads....just to hope to break-even on a best case scenario is dumb. for a lack of a better word.

Too many people or traders chase that fantasy dream. That gambling dream of winning magically big and alot often.
It's like sports...if you had to bet who will win amongst two teams...how do you do it...by just picking the team that has your favorite color, or some other weird silly variable.
If you can't answer this smartly and dynamically...then you shouldn't be trading. at all.
Just doing damage control is not a viable trading strategy.

 

[schweiz]

Hocus pocus math...armchair ivory tower theorems that work in the classroom but not in the real world. Nigh close to ponzi scheme math...hypothetical ideas seemly based on logic. Problem is; the market is not logical nor does it care about math. It is dynamic entirely. It will do whatever it wishes to do, when it wishes to do it, and how it wishes to do it, regardless of any logical rules we may devise and employ to influence it....AND if we are fortunate we only get hints.

The math has unproven asumptions. I actually desire and want a deeper PB, of at least 3 points to make it worth scaling into. ALL trading based solely on math will sooner or later belly up. ALWAYS. The premise is wrong to begin with. Quants..algos..hft's will never beat the market but only for a season, at best. They all fall to the wayside. Always will. But he who understands market dynamics plays and plays and plays over and over again. The dance never ends.

So what you basically say is: Renaissance is fake as it is impossible to make money from math.
LOL.
Math is nothing more than a mathematical representation of "who understands market dynamics plays and plays and plays over and over again." I see in my math patterns that repeat themselves all the time. But they are clearer as I never have to average down.

Problem is that you should know math...and preferably that part of math that leads to profitable trading.You don't have to be a genius for that. I have only average knowledge of math, but that appears to be enough to make money without having to average down.

 

[d08]

Lets be serious do8, don't you think that would depend on the signal your taking and the market your trading?? Not all of us blindly buy or sell just because its going against us, right?

I can only speak about my experiences but here's the thing - I'm naturally inclined to average down, I just seem to gravitate toward this approach but every time I analyze data (for various approaches), it tells me to not average in at all or if needed, average up. In the end, data trumps any convictions one might have.

 

[Zodiac4u]

I can only speak about my experiences but here's the thing - I'm naturally inclined to average down, I just seem to gravitate toward this approach but every time I analyze data (for various approaches), it tells me to not average in at all or if needed, average up. In the end, data trumps any convictions one might have.

Without the outlining of certain criteria, to have a natural inclination/conviction to average down is all about ego (this is a no-no). Data from specific time frames is required for this approach to work. I say: (To a certain degree of course.) If price is good at entry, its even better at a discount, the same could be said about adding at premium. Cheers*