Averaging IN (not Averaging Down)

TDMA said:
That only works for capital trades, not income trades, so unless you can differentiate in your methodology you will at best achieve a 50/50 benefit with scaling, however due to the way the markets work in reality it will be 80/20 against you.

We scale in tranches for the mid to long timeframe trades, and single units for the short term income trades, in effect the income trades are single capital tranches but sometimes they convert to capital or hybrid trades. Confused yet, and yes we scale out on capital trades as well.

If it was easy everyone would make money doing it.
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Hi. I should have mentioned that I am referring to position trading.

But I am interested in your figures of the market being 80/20 against me scaling in when my trade plan is unknown to anybody except myself. Are you saying that the markets are trendless or trend only exist over the short term? I am a little confused.

Maybe scaling in works only for those who have a good understanding of market structure using higher time frames BUT those with more of a random entry require to scale out?
 
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Robert Morse said:
Please define a "capital trade" and an "income trade" as they apply to you. Maybe an example of each.
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The devil is always in the detail, well a capital trade builds capital so are long term or high volatility trades, an income trade generates income so short term or low volatility trades. In any trading you have breadth and depth, the combination combined with timeframe determines the strategy.

Three dimensional, I know down to 100ms charts where the exact crossover occurs, but I am not going to attempt to explain it to anyone, it's built in to the algos and quite happily staying there.
 
Newc2 said:
Hi. I should have mentioned that I am referring to position trading.

But I am interested in your figures of the market being 80/20 against me scaling in when my trade plan is unknown to anybody except myself. Are you saying that the markets are trendless or trend only exist over the short term? I am a little confused.

Maybe scaling in works only for those who have a good understanding of market structure using higher time frames BUT those with more of a random entry require to scale out?
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"when my trade plan is unknown to anybody except myself" this is strictly not correct, it comes down to human psychology, hence on paper using scaling on both income and capital trades should be a 50/50 basis, however unless you are very experienced it skews to 80/20 against you. That is why you rarely see both an income trader and a capital trader, I do both but prefer capital trading, a lot less effort for a lot more gain. Whatever you do, the key is to not over leverage, less is more and with capital trading you need to perfect your entry, more units. Position trading is a subset of capital trading.
 
In chop averaging down works great, in trend averaging IN works great.

Averaging down in trend against you kills you ofcourse.

Averaging IN in chop, means you buy the wrong side of the range.
 
Newc2 said:
After looking back at many of my frustrating trades where they were killed not long after entry, I have come to the conclusion that averaging in is the best way to minimize the effect of market noise while also skewing reward to risk in my favor.

Does anybody have experience with this as I really think the benefits here also extend to helping one's trading mindset? Instead of looking to book profits asap, a trader scaling in is looking to add to a winning trade so the mind is set up correctly from the outset.

Thanks to @tomorton for ringing a bell in my mind to look into this.
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There is never a situation where averaging or scaling is beneficial over the long haul. Use correctly sized full position at the outset and you won't get caught up in the inferior behavior of averaging.
 
Averaging is only good for long term investors who don't yet have the funds to invest fully at the beginning. ---Dollar cost averagers like 401kers
 
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Buy1Sell2 said:
There is never a situation where averaging or scaling is beneficial over the long haul. Use correctly sized full position at the outset and you won't get caught up in the inferior behavior of averaging.
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Thanks. I guess averaging in with higher buy points might be more prudent? Livermore did this
 
If you want to talk trends, say a downtrend, I’ll often enter at a resistance area for a partial position. I’ll average down a little if it goes against me with proper structure only, or if price develops some type of bull trap, I’ll enter on the breakdown, which is what you’re talking about, averaging into a position. Although I’ll never hold into multiple Eliot waves. I’m a scalper

Some types of reversal setups, I’ll take “price risk” by entering when volume is supportive of the reversal, and average in after price begins being supportive of it.
 
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