Averaging down in day trading - when to take a loss?

[MACD]

My own fuckups with that strategy were always due to not having plan in the first place or ignoring my plan by acting in the heat of the moment (i.e. scaling in on every 1.5-2pt against as opposed to 4-6pt per plan, ignoring max daily loss etc). I concur that my own reading of the day's PA action incorrectly (I mean not seeing the rather obvious) was never that bad for my bottom line as was ignoring my plan on position sizing and max loss per trade or day.[/QUOTE]

Yes !
It works extremely well to curtail loss and lower break-even point but as you brilliantly stated one must "Not ignore your Plan" and must respect pre-set Support and Resistance areas. Thanks for your excellent post, Punisher.

 

[Illini Trader]

"Averaging down" and "scaling in" (on an intraday basis in the futures market, or any other basis in any other market) are two radically different things.

"Averaging down" means adding to losing positions, re-entering additionally at what you perceive is a better value price, which will turn out to be right if your original entry turns out to be correct and valid in spite of the movement against you subsequent to your original entry. It increases your risk exposure.

"Scaling in" means adding to winning positions after your original entry has already turned out to be correct, typically (but not always) not increasing your original risk exposure.





This decision you need to have made (on a conditional basis) before the original entry.

Personally, I put an initial stop-loss where I want to be taken out of the trade if the price reaches it, on the grounds that if that happens, my original entry has proved not to be a correct/valid one, and that this is one of my inevitable losing trades.

I know before I enter what proportion of my trades are losers, and at what point I want to exit, if that happens.





Or add to it? Because it was a good entry?

I know only one professional trader who "averages down" successfully. For myself, I avoid it like the plague.

For me, "the first loss is the cheapest".

A ton of market wisdom in just one post!! WOW