Averaging down and scaling up as a trading strategy?

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Plusactive

I have just started trading futures about 8 months ago. My strategy is very straight forward and I always start my trading with a specific view of the market and stick to my position. That is, I will average down when it goes against me and scale up if it goes accordingly. That being said, I also place a stop loss not more than my previous days profit.

I know most people are against this but somehow it works for me. Just wanted to know if anyone does this and how it turned out for them?
 
Quote from Plusactive:
----started trading futures about 8 months ago.
----My strategy....
----very straight forward....
----specific view of the market....
----stick to my position.
----average down when it goes against me....
----scale up if it goes accordingly.
----place a stop loss not more than my previous days profit.
----somehow it works for me.
More...
1) It "works" until it no longer "works". :cool:
2) You're in a "race against time" before you experience a single, massive loss or a lengthy losing streak. :(
3) What if today's profit is "small"? Does that mean you'll be trading with too tight of a protective stop-order the next day? :confused:
 
Quote from Plusactive:

I have just started trading futures about 8 months ago. My strategy is very straight forward and I always start my trading with a specific view of the market and stick to my position. That is, I will average down when it goes against me and scale up if it goes accordingly. That being said, I also place a stop loss not more than my previous days profit.
More...

Where do you place your stop loss if the previous day resulted in a loss?

FWIW, as a beginner I used to trade based on my view and stick to my position. The net result over time was negative. When I finally learned to simply listen to what the market's price action was saying, I developed a trading plan that's produced consistent profitability for over 3 years.

Now, if you've been doing what you do for 8 months and it's produced acceptable profits for you over that period of time, then it doesn't much matter whether anyone else has traded, or currently trades, this way.
 
Quote from Plusactive:

...stick to my position...
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There's your first mistake. You have to be flexible and go with the flow regardless of your view/opinion.
 
Quote from Plusactive:

I have just started trading futures about 8 months ago. My strategy is very straight forward and I always start my trading with a specific view of the market and stick to my position. That is, I will average down when it goes against me and scale up if it goes accordingly. That being said, I also place a stop loss not more than my previous days profit.

I know most people are against this but somehow it works for me. Just wanted to know if anyone does this and how it turned out for them?
More...

If its working for you great, the fact that you asking it's an indication you dont fully trust the results, good, because you should not!

Sorry.
 
Quote from NoDoji:

Where do you place your stop loss if the previous day resulted in a loss?

FWIW, as a beginner I used to trade based on my view and stick to my position. The net result over time was negative. When I finally learned to simply listen to what the market's price action was saying, I developed a trading plan that's produced consistent profitability for over 3 years.

Now, if you've been doing what you do for 8 months and it's produced acceptable profits for you over that period of time, then it doesn't much matter whether anyone else has traded, or currently trades, this way.
More...

Ditto.

Every beginner, I think because we watch cnbc etc., feels like they need to "have a position". You shouldn't be making trades based on how you think or feel about a market. Instead you should have created a way to systematically determine what the market is telling you. Your own personal biases will get in the way if you haven't created some kind of way to weed those out of the process.

Also, the main problem with averaging down is that you have on your biggest size on your worst trades and your smallest on your best. I'm sure it can be done profitably but you have to find a way to rectify the problem.
 
It's not just about making money it's also about being able to scale your stategies with heavy size as you progress with consistency and profitability.

Averaging down gets in the way of this, big time, and for that reason alone it is seriously an inferior money management strategy.

The other option is to have access to huge amount of capital but this tends to be the exception and not the rule.

My suggestion, make sure your strategies allow size growing as you witness consistency or keep looking, otherwise, it's just not worth the trouble.
 
Your trading idea has legitimate merit and if done correctly you will never have a losing trade. Only thing you need is access to unlimited capital . . .
 
Specific view of the market = too rigid

Previous days profit as a stop loss = totally arbitrary

And of course as has already been pointed out but if yesterday was a loss then...


No way this is a long term strat, sorry

Quote from Plusactive:

I have just started trading futures about 8 months ago. My strategy is very straight forward and I always start my trading with a specific view of the market and stick to my position. That is, I will average down when it goes against me and scale up if it goes accordingly. That being said, I also place a stop loss not more than my previous days profit.

I know most people are against this but somehow it works for me. Just wanted to know if anyone does this and how it turned out for them?
More...
 
Also, the last 8 months have been almost nothing but an up market. Wait until we hit a sideways or down market. You need to experience all the cycles and then come out the other side knowing if your system is legit or not.
 
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