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

[jokepie]

Quote from 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)

It all depends on the range of the market, your instrument and price action.....a& Most importantly YOUR Anticipation of the price movement.

If i see big fat candles "which" i call fist pumping, i do not average up rather, hit the hammer max out....
If I see a slow creep, I would rather stick with the initial position.

 

[1a2b3cppp]

Quote from 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.

I thought I remembered reading somewhere about how the Turtles method no long worked because of some change in market structure or something.

But I'm sort of familiar with the story, wasn't it a breakout-buying system? And it was entirely mechanical and the people that lost money did so because they couldn't follow the rules?

 

[1a2b3cppp]

Quote from jokepie:

It all depends on the range of the market, your instrument and price action.....a& Most importantly YOUR Anticipation of the price movement.

If i see big fat candles "which" i call fist pumping, i do not average up rather, hit the hammer max out....
If I see a slow creep, I would rather stick with the initial position.

See, I dunno. I've heard it argued that those big tall candles mean the trend is ending because they form when the herd jumps onto the trend, and the herd loses money.

Of course, that rule is broken probably as often as it is true.

 

[spindr0]

Quote from 1a2b3cppp:

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 the whole point. There's no way to know if price dropping below your stop is noise (whipsaw) or trend reversal. Since you're trying to protect a gain, especially since you averaged up, the stop serves its purpose and gets you out. Whether it saved you from losing a lot of your profit (or incurring loss) or prevented you from making a larger profit is irrelevant. You take what's in front of you not what you wish could be there.

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.

I'd like to go for the ride as well - with 25 year old Playboy twins and a 7 figure income so I'll have the looseness in the crotch fromn the wallet hanging down, with no noise (use duct tape) and a larger additions to the tool in my kit . But given reality, I'm settling for booking profits wherever possible and keeping losses to a minimum and ignoring woulda, coulda, shoulda.

 

[spindr0]

Quote from 1a2b3cppp:

I thought I remembered reading somewhere about how the Turtles method no long worked because of some change in market structure or something.

Nothing lasts forever. For a price, I could show you a moderate risk, high reward system that worked well (6 figures) in '08 and '09 but isn't worth squat now. Edges can be fleeting. Sooooo, what do you think worthless is worth now??

 

[jokepie]

Quote from 1a2b3cppp:

See, I dunno. ........ I've heard it argued .......... that rule is ....



that those big tall candles mean the trend is ending because they form when the herd jumps onto the trend, and the herd loses money.

Market i flexible and so should you be...!!!

the theory that you heard (I have never heard it) to me sounds irrational. (no disrespect intended to you or who brought it to your attention). Candles are mere representation of PRICE movement constraint in a time FRAME. you change the time frame your theory will vanish. One big tall candle can be broken into 20 small candles and viceversa.

What gives is if you SEE price moving UP/DOWN ...FAST (KEY)... you can rely on tht action as it represents participation.


SOme times it Depends which part of the TREND this happens.... ONSET or mature stage...

When this happens on the onset... you risk and reward gets + as you can stick the stop closer...

Hope this helps

 

[worldwary]

Quote from 1a2b3cppp:

I thought I remembered reading somewhere about how the Turtles method no long worked because of some change in market structure or something.

But I'm sort of familiar with the story, wasn't it a breakout-buying system? And it was entirely mechanical and the people that lost money did so because they couldn't follow the rules?

Yes, it was a breakout system. Could be that the specific entry parameters they used (e.g., break of highest high of last 20 days or whatever) no longer work, but the general principle of adding to winners should still work if it ever did.

That said, it would be tough psychologically to trade this way. A lot of your winning trades would end up stopping out for breakeven or a small loss. The only way this could be profitable overall is if the trader had the intestinal fortitude to keep trading after a string of losses, which would be difficult. That might explain why some of the turtles did better than others.

 

[FrankSlaughtery]

1a2b3cppp - you could use ATR to set a trailing stop (e.g. 2 ATR below for long/reverse for short)

 

[salvador90]

Quote from 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)

Medium term trend follower here...

I add whenever one component of my system looks for oversold conditions in the short term that go against the main trend. I add on those situation