Average down - small wins, big losses?

[ironchef]

Dogmatic vs pragmatic. Easier and safer to be dogmatic than pragmatic. Higher profit potentials if you are pragmatic and right.

The dogmatic says NEVER to average down.

The pragmatic says, if the price is good at entry, it is even better at a discount. Provided the assumptions for entry stay the same and after reexamination, you haven't overlooked some new information to cause your assumptions to change.

 

[schweiz]

Dogmatic vs pragmatic. Easier and safer to be dogmatic than pragmatic. Higher profit potentials if you are pragmatic and right.

You are cheating. If you compare the two you should for both add RIGHT, not only for the pragmatic. And then the question is: will the profits be higher?

The pragmatic says, if the price is good at entry, it is even better at a discount. Provided the assumptions for entry stay the same and after reexamination, you haven't overlooked some new information to cause your assumptions to change.

If you have to average down, why would you be right this time? You were already wrong the first time. That's why you want to average down. Might as well be a second failure. You only know in hindsight if the price is good. That's the major problem.

All these uncertainties make trading difficult.

 

[Sprout]

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?

It all starts with the 5x5 grid drill. Make an attempt, post the results.


Every bar is defined, all permutations known, the market operates in an order of events.

Price is the dependent variable of the independent variable volume.


'shadow' reversal example

 

[volpri]

It all starts with the 5x5 grid drill. Make an attempt, post the results.


Every bar is defined, all permutations known, the market operates in an order of events.

Price is the dependent variable of the independent variable volume.


'shadow' reversal example

View attachment 181658

Hello bean sprout.

Could you make a live call in the Es tomm using the hersey candy method as espoused in your post above. Just advice us of your ENTRY when made. Your STOP. Then your EXIT.

FOR EXAMPLE: entry price 9:30 a.m Xxxx

 

[tomorton]

It all starts with the 5x5 grid drill. Make an attempt, post the results.


Every bar is defined, all permutations known, the market operates in an order of events.

Price is the dependent variable of the independent variable volume.


'shadow' reversal example

View attachment 181658

I can't make an attempt as I don't understand what you're talking about.

 

[Simples]

It all starts with the 5x5 grid drill. Make an attempt, post the results.


Every bar is defined, all permutations known, the market operates in an order of events.

Price is the dependent variable of the independent variable volume.


'shadow' reversal example

View attachment 181658

The annotations are very clear to me. THX!
Having explanations on graph is also very clear and pedagogical!

Ie. "shadow" == FTT

Calling markets, one trade and/or undefined risk, basically have no meaning. It's all in the method and the time/focus one has to dedicate to it.

CC: @WchPl , @dratsum

 

[Sprout]

I can't make an attempt as I don't understand what you're talking about.

Googling the keywords including elitetrader would get you to the source.


The jist -

Take a blank sheet of paper.

Make 5 rows and 5 columns of a single price bar with 5 horizontal ‘tics’ marking equal intervals of the bar. This segments a bar into 4 equal seqments with 3 tics in the middle and 2 on the ends.

This is the blank master.

On the copy of the blank master, draw over the bar one possible permutation of a price bar - the open, the high, the low and the close. Another bar would have the same OHL but a different close, etc.

Any price bar has 25 possible forms it could be.

Approach the the forming of each bar in the grid in some type of logical organizational way that makes sense to you.

Color the bars.

Post the result.

Working through the exercise by scratch is better than making a copy of someone else’s work. A copy is better than not doing the exercise at all.

The 5x5 grid begins the process of building the mind’s sprectrum of differentiation.

 

[volpri]

It all starts with the 5x5 grid drill. Make an attempt, post the results.


Every bar is defined, all permutations known, the market operates in an order of events.

Price is the dependent variable of the independent variable volume.


'shadow' reversal example

View attachment 181658

Look bean sprout that reversal you have explained .....well there is a simpler explanation.

The bar before it is simply a bear doji bar with a big tail on the bottom and big volume. That just means buying has come in. Chances are it wasn't selling or it would have likely closed low. Price has been first sideways at the top. Then we get an 8 bar tight bear micro channel with no PB's until the 9th bar which you have labeled "reversal". This bear micro channel has gaps galore all the way down (there is a gap between the low of each bar and the low Of the prev bar...also gaps between the close of a bar and the previous bar. Also gaps between the high of a bar and the low two bars back). All these gaps indicate urgency in selling. And most are made on increasing or relative high volume. There is a change in the the gaps when we hit bar 6 of the micro channel. Bars 6,7,8 all three have higher closes on their respective bars (and on high vol) than the closes on each of the first 5 bars (i.e. close location in terms of the range of the bar). This indicates buying coming in and a probable end to thee bear micro range. Probally the best the bears will get is a sideways range ( can be a small or big sideways movement. The idea is to wait for a BO of the sideways formation north or south and take a position. Or, if the sideways formation is big enough, in terms of range, scalp multiple times as the range evolves until the train leaves the station north or south then jump on board. In this case that would be bar 12 (counting from the first red bar of the micro range at the top). So one is long on bar 12. Keep buying bar 13, 14, 15, 16 adding to your losing position then ride the train loaded the rest of the way to the top until the fat girl sings. If you don't find that scaling into a losing position is palatable and compatible with your w.v. of risk then just take your position set your stop a couple of ticks below bar 8 and whistle dixie thru the drawdown...sweat a little.. then shout on the ride to the top.

If i had to draw all those lines and write all that text i would find the train has left the station without me while I am still talking to the pretty girl awaiting the arrival of her boyfriend who she introduced me to when the train first arrived. My fascination with the girl would cause me to not hear the conductors call for final departure. But then i have a one track mind. Too bad I am have missed the train. It too has a one track direction and I ain't on board. Worst of all, i don't get to hear the fat lady sing.

 

[volpri]

Are we headed for new highs today in the ES? Or a break south?

 

[Scataphagos]

I'm not going to read the entire thread, but there is a famous picture of Paul Tudor Jones at his desk with a sign on the wall behind him. It reads, "Losers Average Into Losers".

If you don't understand what that means, you shouldn't be trading at all.