AVERAGING UP (and/or anti-martingaling) your way to profits

[1a2b3cppp]

This thread is all about ADDING TO WINNING POSITIONS

Do you add to winning positions?

If so, do you add smaller positions with each subsequent add? Or equal positions with each subsequent add?

Or larger positions with each subsequent add and greatly increase your average cost and run the risk of turning a profit into a loss with a small move against you?

Finally, can random entires + adding to winners be used to form a profitable strategy when you are unable to predict market direction? In other words, I know all of the millionaires and gurus here have magic indicators or possess the knowledge to make MACD and other indicators work profitably for them (as they always claim in the other threads), but for those of us without such knowledge and abilities, how feasible is averaging up to creating a profitable strategy?

Finally, where do you guys put your exits when averaging up?


(for the sake of definition, let's define "averaging up" as adding to a winning position in any increment, and "anti-martingale" as doubling up on winning positions after every fixed increment)

 

[Redneck]

123,

I don’t have bandwidth to respond in a coherent way to your question right now…..

But I would like to leave you with this little thought if I may


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If I can trade… then obviously I can trade my way out of a deficit

And if I can trade my way out of a deficit…, then why in the hell would I want to add to a loser (of any sort) and make it harder on myself

Personally I don’t …..

Yes some are going to win... but the one(s) that doesn't/ don't - will eat your lunch



I simply take the loss, and keep on truckin

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Now obviously RTM traders are notwithstanding


RN

 

[euclid]

If your going to add to a position you need a good reason. Just because it's winning (or losing) is not a good reason, unless you think your personal P/L is a predictor of future price movements.

 

[PocketChange]

I like 2,1,1,1, type progressions or incrementing 1/2 your net position rounded down in even intervals. This is typically a one way road and you close out on the first interval pull back. Your risk is front loaded and once your past 2 intervals you've locked in a profit.

 

[spindr0]

Quote from 1a2b3cppp:

Do you add to winning positions?

If so, do you add smaller positions with each subsequent add? Or equal positions with each subsequent add? Or larger positions with each subsequent add and greatly increase your average cost and run the risk of turning a profit into a loss with a small move against you?

If I'm trading news/EA's I may add on the way up in smaller increments. Money management is the key. Never let a decent profit turn into a loss.

Finally, can random entires + adding to winners be used to form a profitable strategy when you are unable to predict market direction? ... how feasible is averaging up to creating a profitable strategy?

If you're unable to predict market direction (or at least recognize momentum) then you've got a serious problem. Neutral or hedged option option strategies may be a better choice but that requires a whole nuther level of understanding. Nothing random is going to win over the long run.

Finally, where do you guys put your exits when averaging up?

Run a trailing stop. Don't be the deer caught in the headlights, wondering WTF is going on.

 

[1a2b3cppp]

Quote from spindr0:
If you're unable to predict market direction (or at least recognize momentum) then you've got a serious problem. Neutral or hedged option option strategies may be a better choice but that requires a whole nuther level of understanding. Nothing random is going to win over the long run.

I can neither predict direction or recognize momentum. If I could predict direction I would be a millionaire by now.

"Neutral or hedged option strategies", you mean like buying long straddles, strips and straps all over the place?

Run a trailing stop. Don't be the deer caught in the headlights, wondering WTF is going on.

How do you structure your trailing stop so that it doesn't get triggered by "noise" (or all the other losing trader's stops)?

 

[1a2b3cppp]

Quote from PocketChange:

I like 2,1,1,1, type progressions or incrementing 1/2 your net position rounded down in even intervals. This is typically a one way road and you close out on the first interval pull back. Your risk is front loaded and once your past 2 intervals you've locked in a profit.

Random entries? Seems like this could generate huge winners if you catch a trend. Do you get stopped out like crazy a lot of the time?

 

[spindr0]

Quote from 1a2b3cppp:

I can neither predict direction or recognize momentum. If I could predict direction I would be a millionaire by now. "Neutral or hedged option strategies", you mean like buying long straddles, strips and straps all over the place?

Let's forego the option discussion since this is a Trading bb.


How do you structure your trailing stop so that it doesn't get triggered by "noise" (or all the other losing trader's stops)?

How do you know what's noise and what's movement? My stops are to protect my gain/limit my loss. If the noise gets me, so be it. I walk away with the worst case result that was acceptable to me. Opportunity loss is woulda, shoulda but didn'ta

 

[1a2b3cppp]

Quote from spindr0:

How do you know what's noise and what's movement? My stops are to protect my gain/limit my loss. If the noise gets me, so be it. I walk away with the worst case result that was acceptable to me. Opportunity loss is woulda, shoulda but didn'ta

It's hard to quote your posts when you reply in my quotes. lol.

How do I know what's noise? I don't. After trying to study price movement for 3+ years, I don't. Price will look like it's gonna go up, then go down just enough to stop me out, and then rocket upward.

Noise is the crap that stops you out without price changing direction. And it's impossible (for me, not for ET millionaire gurus) to know in real time if it's "noise" or "trend reversal."

That's why I'm trying to learn to profit without predicting direction. Price will eventually go somewhere. I'd like to go along for the ride when it happens and not be affected by "noise" and not care what happens in the meantime.

 

[worldwary]

You might be interested in reading about the "Turtles" if you haven't already. This was a group of trend-following traders whose methods used to be secret but have now been revealed by at least one of the former turtles.

Adding to winners was a key part of the turtle method, as I recall. They used some form of average true range to determine when to add to a position and where to trail stops. After the trade had moved some distance in their favor, adding to the position allowed them to potentially turn the trade into a "home run" and the trailing stop placement served to lock in some profits. Most trades do not in fact turn into home runs but some can be expected to, and it only takes one or two to make a good year.

That said, I'm not sure if it would make sense to add to a winning position if you truly believe that price action is random. The turtles were trend followers and obviously believed in the tendency of prices to trend in some non-random way. Maybe adding to winners might still make sense without this belief but it seems contradictory to me somehow. I need to puzzle this through.