Have you watched index futures trade intraday?? There are times where the market is hinting that prices are going higher even though they are trickling down. Ever noticed how the market will take 2 hours to move down 3 pts and then 20 minutes to move up 6? This is where avging in is huge. But it takes a keen eye to see the market unfolding in such a way. There is a HUUUUGGGGEEEEE difference between what I've described and just avging down because prices are going lower.
Averaging Down the real Holy Grail
- Thread starter Avgdownking
- Start date
Identifying the trend is SEPARATE from position sizing: two integral parts of the same whole.
I see them trading intraday every day. Indeed, I TRADE them everyday, if I see opportunity.
I cannot imagine a WORSE instrument for averaging down than stock index futures (on a daytrading basis).
Quote from JimmyJam:
Not the best example.
He's constantly retooling.
And his losses, if they are to be believed (and for the sake of this discussion, I will present them as being fact) are astronomical by my measurements:
Big Loss #1
and even when he re-tolled, he still crapped-out:
Big Loss #2
... and there have been other huge losses along the way.
Considering the fact that thoses losses were accumulated on strong one-way trend days, yes I do believe he employs some type of averaging down philosophy in his trading.
If anything these results support my previous statement(s) and shows why I would not recommend such a philosophy to anyone ... except the trader who is working with OPM.
Good trading, (sincerely),
J Jam
Yes, I use OPM and wouldn't have it any other way...
WOW, CRAZY!!! I assume he has a hell of an account size - wow... This is one of the reasons i like stocks for averaging down versus indices - at least i can diversify across non correlated stocks ... (though of course as ADK says I am sure averaging down can work in futures with a proper strategy).
Notice how he mentions that he didn't stick to his new rules - he hasn't developed the necessary discipline yet... and without that you will get KILLED averaging down, up, etc...
No offense taken on previous post! - my fault - took it too literally...
Cheers,
il2t
No offense JJ but i don't agree.. i think avging up's attraction is that you are never in a loss position - ie. you buy at a 2nd, 3rd, etc... points above your average cost and get out even, small loss (on first contract only) or large win.
Whereas avging down means you have an unrealized loss prior to adding to your position - this will reduce your average cost and allow you to get out even or in profit at a much lower price.
Yes you do need knowledge, screen time, discipline to trade this method successfully... Avging down sounds easy but it really isn't - out of a group of 20 who join our prop firm you will get lucky to have 1 successful trader with a handful scraping by...
One thing that I pay very close attention to is the 200 MA.
Fundamentally speaking, averaging up is a great money management approach the big problem with it is that it requires great market reading skills and I think it works best on the big picture and not so much on the noisy daily basis. I'm sure Anekdoten does better in the long run with his technique unfortunately I tend to be wrong on the entry so many darn times I got not choice but to divide the entries at different support levels. I tried many times to cut my losses short the problem is I had so many of them the best I could do at the end of the month was break even so I had to cut corners and use averaging down so shoot me for using what works for me. In the case of MBA, I think his drawdown limit was completely out of wack but Im sure he will learn from his mistake. Great props for posting his winners and losers on a public board, hats off to him and hope he recovers asap. One courageous trader.
ADK
Fundamentally speaking, averaging up is a great money management approach the big problem with it is that it requires great market reading skills and I think it works best on the big picture and not so much on the noisy daily basis. I'm sure Anekdoten does better in the long run with his technique unfortunately I tend to be wrong on the entry so many darn times I got not choice but to divide the entries at different support levels. I tried many times to cut my losses short the problem is I had so many of them the best I could do at the end of the month was break even so I had to cut corners and use averaging down so shoot me for using what works for me. In the case of MBA, I think his drawdown limit was completely out of wack but Im sure he will learn from his mistake. Great props for posting his winners and losers on a public board, hats off to him and hope he recovers asap. One courageous trader.
ADK
Read the posts in more detail before talking. ADK and I do not advocate irresponsible trading - we give you the framework to make avging down work. I'll assume you haven't fully read the posts prior to replying with your insults so I won't take offense...
lol, it takes WAY more balls to hold a large position at support after avging down than it is to avg in while in a positive p/l position. Not knocking the avg uppers, I admire their ability, just not as risky...
plz keep your comments constructive, everyone is entitled to their opinions...
Cheers,
il2t
You should try reading up on AHG - you could improve your entries / entry confirmations ...
My comments have been constructive. Simply put, averaging down is a weak strategy for weak traders. It is a strategy that ensures small positions on the inevitable big winners and larger positions on the inevitable big losers (even when using stops).
Weak traders are inevitable losers.
I don't mean to come across as harsh. I didn't make the rules here. That is just the way it is.
I invite refutation of my statements, with cogent reasoning and sufficient evidence.
It irks me that some traders here can be so dense. Tell me, what happens when I buy three support levels and dump them all at new highs or some major resistance point.
Look at the charts, you see vertical price movements all the time making new significant trend changes every darn week?
Accept the fact that the taboo notion of averaging down is so far up your ass, probably due to lack of discipline or someone stepping forward to tell it like it should be done (like me) that you just cant see past that.
ADK
Look at the charts, you see vertical price movements all the time making new significant trend changes every darn week?
Accept the fact that the taboo notion of averaging down is so far up your ass, probably due to lack of discipline or someone stepping forward to tell it like it should be done (like me) that you just cant see past that.
ADK