You need rules.
Can't do it forever and must go with the trend at hand.
It's all in the mathematics just like options.
ADK
Can't do it forever and must go with the trend at hand.
It's all in the mathematics just like options.
ADK
Averaging Down the real Holy Grail
- Thread starter Avgdownking
- Start date
Quote from uptik2000:
amen.
Please provide specifics as to the rules you use.
Could you please explain this statement?
Thank you!
Bernard
I agree, the secret is to to avg down with and not against the prevailing trend... i do this in stocks and it's a powerful technique. I do it up to the support and either get out, get smaller or reverse depending on the market at that time and the significance of the support - not all supports are the same!! The reverse of course when shorting.
It's truly amazing how simple this technique can be and it's equally amazing how many prop traders will take massive losses because they will avg down past supports/resistances - they dont have the necessary discipline...
Absolutely.
Guess how much money this technique made today for me in the ES and the Nasdaq?
I'm sure you know.
All i did was buy significant support levels yesterday based on multiday charts and fib in a bullish market.
Daily trendlines intact.
Today, massive profits.
Major market reversals don't happen too often by the time a big loss gets you are so green it does not affect you, it hurts, but you are still green.
The name of the game is support and resistance. That's it. Buy support in bullish markets, short resistance in bearish markets. Since markets are volatile you implement a responsible averaging down technique and off you go.
The holy grail, period.
ADK
actually days like Oct. 11 are a paradise type market for those who average down. If one were implementing the technique from the opening bell, by the time market tumbled, the person would have been already loaded up short and would have made very good coin. Even if one were to bail out at 1570 (first pull) instead of holding for the rest of the drop to unfold, and then went short 1 contract at each point all the way down to 1560, the position would be 11 contracts at avg. price of 1565 (more or less). If one had enough margin for a position like that and hold it overnight .... well, the market closed at 1574 the next day. That is 9 points times 11 contracts = close to 5K plus whatever the short would have provided from the day before would have given a nice end of the work week coin.
Even if the person would have sold the position at the opening bell, it would have been a BE result. If one were to hold it until first wave after the opening jitters, that would put the price at around 1570, still a nice 5 point per contract gain.
The problem guys for a system like that is when the market does not retrace during the session At ALL. This is the kiss of death for this strategy, not what happened on Oct.11.
Having said that I do not in any way support trading in this particular way. The stress is way too high and the risk of ruin is always around the corner. How can it be any other way if one is constantly going against the trend. It is like driving against the traffic on an interstate. It works until it dos not and then you better watch out.
Even if the person would have sold the position at the opening bell, it would have been a BE result. If one were to hold it until first wave after the opening jitters, that would put the price at around 1570, still a nice 5 point per contract gain.
The problem guys for a system like that is when the market does not retrace during the session At ALL. This is the kiss of death for this strategy, not what happened on Oct.11.
Having said that I do not in any way support trading in this particular way. The stress is way too high and the risk of ruin is always around the corner. How can it be any other way if one is constantly going against the trend. It is like driving against the traffic on an interstate. It works until it dos not and then you better watch out.