ES Journal Archive (2006 - 2008)

[smilingsynic]

Averaging down and averaging up, as with all approaches to position sizing, are tools, and in the wrong hands, both can destroy an account.

The main problem with averaging down, even if one uses stops, is underexposure on the inevitable big winners and full exposure on the inevitable losers (the same problem with limit orders, btw).

I keep my position sizes the same 95% of the time and use market orders, so I am guaranteed a fill.

I WILL average up on strong trend days, especially late afternoons, and those tend to be my best days by far. I do much better averaging up on trend days up than trend days down.

 

[volente_00]

It's really just a matter of how precise you pick your entries. If history shows you have a high % chance of being right on the trade on the original position then you should just go all in on the first attempt.

What bothers me about averaging down is if you are wrong on the first lot, by adding you are trying to put off taking the loss in hope of a direction change. If you go long and it moves against you a certain amount, then by adding more you are trading against the short term trend.

The other reason I don't like averaging is because if you are right and it moves back in the money then you are rewarding a negative behavior. If this happens enough, where do you draw the line with regards to exiting the trade if you are wrong multiple times ?

now if you nornally trade a 10 lot with a 2 point stop, I see nothing wrong with buying 5 and then adding 5 as long as your risk parameter stays the same. But to me it undermines ones self confidence if you just bite at the trade, which means your lack conviction and perhaps should not be in it at all.

 

[apex82]

Quote from smilingsynic:

Averaging down and averaging up, as with all approaches to position sizing, are tools, and in the wrong hands, both can destroy an account.

The main problem with averaging down, even if one uses stops, is underexposure on the inevitable big winners and full exposure on the inevitable losers (the same problem with limit orders, btw).
.

very good point.. do what works for you. I only use market orders on the higher timeframes... on the smaller I am all limit. When you use market orders you will have to give up some of your profit in order to wait for confirmation entry. Its a toss up.. less % winners and larger targets or higher % winners but smaller targets.

You are also are getting better R:R on your addon, which if you have an edge will work itself out over many trades. I only do this because I have many thousand trades backtested as well as traded live and I know its an advantage to add on with certain setups.

 

[smilingsynic]

Quote from volente_00:

It's really just a matter of how precise you pick your entries. If history shows you have a high % chance of being right on the trade on the original position then you should just go all in on the first attempt.

What bothers me about averaging down is if you are wrong on the first lot, by adding you are trying to put off taking the loss in hope of a direction change. If you go long and it moves against you a certain amount, then by adding more you are trading against the short term trend.

Bingo! Trends should be exploited, not contested.

 

[Spooz Top]

days like this are traders dream.....geeeez...congrats to those who prospered as i lined up list of to do`s today after a quick morning long that gave me 1/2 my normal quota.

i actually planned taking the rest of the week off but after seeing todays action,i cancelled tomorrows commitment.........which means i`m sure we`ll see a gap n grind day.

 

[Sponger]

Quote from volente_00:

The other reason I don't like averaging is because if you are right and it moves back in the money then you are rewarding a negative behavior. If this happens enough, where do you draw the line with regards to exiting the trade if you are wrong multiple times ?


Point well taken....really hits home to the trader who doesn't want to take a loss, pulling their stoploss once the trade is on and going against them. Then all of a sudden, it turns and they are positive. If this happens enough times, its a HORRIBLE negative reinforcement habit to overcome. I think we all go through that stage.

Saxon22 can attest to the perils of averaging as the price goes against you. Others in ES have a trading plan that they never deviate from, so it works for them. Speaking of which, is Saxon22 still here?

 

[saliva]

I would like a feedback from those who are currently using a DOM as their trading platform. Currently, I'm looking into these following products:

<li>AT
<li>NinjaTrader
<li>Trade Navigator
<li>Button Trader

Perhaps you know something better?

 

[Spectre2007]

you can average, as long as your unrealized loss doesn't exceed one of:

1) daily income
2) weekly income
3) monthly income

calculate what you make on average per day.. its easy to come back from a daily loss, but imagine how long 1 position loss going against you a months amount will take....well a month..

a hard stop could be a weekly loss. A weeks loss can be relatively easy to come back from... but a months loss can be demoralizing, especially if you need the income.

you don't want to be fighting a uphill battle, if your losses exceed the longer timeframes..

 

[saliva]

Quote from Spectre2007:

you can average, as long as your unrealized loss doesn't exceed one of:

1) daily income
2) weekly income
3) monthly income

calculate what you make on average per day.. its easy to come back from a daily loss, but imagine how long 1 position loss going against you a months amount will take....well a month..

a hard stop could be a weekly loss. A weeks loss can be relatively easy to come back from... but a months loss can be demoralizing, especially if you need the income.

you don't want to be fighting a uphill battle, if your losses exceed the longer timeframes..

No offense, but why would you even want to hold on to a loser that long? You must be a real idiot to risk a whole month's "income".

 

[Spectre2007]

notice it tracking..the line..