Hi, explain to me how adding to a WINNING position is profitable?

Quote from IronFist:

I know everyone is all "don't martingale, it's bad, booo, only losers average losers, etc."

htf do you average INTO a winner? It kills your trailing stops.

Go long at 100.

Price is now 105. You are winning! You think this trend is going to run long so you buy another @ 105!

Now your average cost is 102.5.

Why is this bad?

You just killed all your "wiggle room."

If price jiggles a bit down to 102 OH SNAP not only are you stopped, out, but you LOSE MONEY. And of course it WILL jiggle down to 102 on its way to 200.

Had you not averaged into it, you'd still be a) in the trade and b) in the money if it wiggled down to 102. I don't know about you guys but if I bought at 100 and lost money at 102 I'd be pissed.



Now tell me why I'm wrong about this?
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1stly just stop 'gambling', and start trading.

Why would you make a trade at 100 unless you were extremely certain that it wuld be profitable??

But if you are then start at 2x value per pip.


And stop calling trades 'winners' and 'losers'.

profitable trades should just be standard normal trades, trades that you close for a loss are the 1s where you then need to look and wrkout why you had a losing trade.
 
If you subscribe to the notion that most under capitalized futures traders ultimately blow out by attrition then the pursuit of outlier winning trades is a logical goal.

Trend followers do not CARE about pissing away a penny-ante profit. Those small gains will only be given back on the next horseshit trade anyways.

I suggest you read Reminiscences, the Rich Dennis interview in Market Wizards and Way of the Turtle by Curtis Faith.
 
Quote from spanish89:

1stly just stop 'gambling', and start trading.

Why would you make a trade at 100 unless you were extremely certain that it wuld be profitable??
More...

Obviously you shouldn't enter unless you know it's gonna be profitable.

But averaging up, as I explained above, can stop you out of what would be a winning trade with a loss.
 
Quote from IronFist:


Go long at 100.

Price is now 105. You are winning! You think this trend is going to run long so you buy another @ 105!

Now your average cost is 102.5.

Why is this bad?

You just killed all your "wiggle room."

If price jiggles a bit down to 102 OH SNAP not only are you stopped, out, but you LOSE MONEY. And of course it WILL jiggle down to 102 on its way to 200.

Had you not averaged into it, you'd still be a) in the trade and b) in the money if it wiggled down to 102. I don't know about you guys but if I bought at 100 and lost money at 102 I'd be pissed.



Now tell me why I'm wrong about this?
More...

Adding to a winning position but buying at technically higher prices is definitely a specialist strategy but is for long term positions so a stop would be placed well below 102 in this instance.No-one who adds to winning positions would have a stop this close.On the upside you wouldn't try and sell them at,say,107 either,more like 150 and higher but you need a stop far enough away that a minor price correction will not make you exit the trade.

It is a strange approach,but like you say,if it's on it's way to 200 and you can buy at 100,most people only want to buy more if they can buy cheaper but if your 'in' trade happens to buy the low and you genuinely have 200 as a target then why not keep adding on the way up?
 
Quote from point&click:

Adding to a winning position but buying at technically higher prices is definitely a specialist strategy but is for long term positions so a stop would be placed well below 102 in this instance.No-one who adds to winning positions would have a stop this close.On the upside you wouldn't try and sell them at,say,107 either,more like 150 and higher but you need a stop far enough away that a minor price correction will not make you exit the trade.

It is a strange approach,but like you say,if it's on it's way to 200 and you can buy at 100,most people only want to buy more if they can buy cheaper but if your 'in' trade happens to buy the low and you genuinely have 200 as a target then why not keep adding on the way up?
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Thanks for the detailed answer.
 
You might benefit from a slightly different mindset.

Don't worry about what you paid for something. If it's 105 and you think it's going higher then it doesn't matter that you paid 100 for it the first time. Buy more at 105!

If its 90 and you think it's going lower, then sell it at 90! Doesn't matter that you paid 100 for it. IT'S IN THE PAST! THE PAST DOESN'T MATTER ANYMORE. FOCUS ON THE FUTURE!
 
Exactly. Forget the previous last trade @100, your profit/loss is determined by the last trade @105. In other words, you should remember that your last price bought was @105, not @100 nor @102.50.

Quote from BeatingtheSP500:

IT'S IN THE PAST! THE PAST DOESN'T MATTER ANYMORE. FOCUS ON THE FUTURE!
More...
 
Quote from IronFist:

I know everyone is all "don't martingale, it's bad, booo, only losers average losers, etc."

htf do you average INTO a winner? It kills your trailing stops.

Go long at 100.

Price is now 105. You are winning! You think this trend is going to run long so you buy another @ 105!

Now your average cost is 102.5.

Why is this bad?

You just killed all your "wiggle room."

If price jiggles a bit down to 102 OH SNAP not only are you stopped, out, but you LOSE MONEY. And of course it WILL jiggle down to 102 on its way to 200.

Had you not averaged into it, you'd still be a) in the trade and b) in the money if it wiggled down to 102. I don't know about you guys but if I bought at 100 and lost money at 102 I'd be pissed.



Now tell me why I'm wrong about this?
More...

Move your stop to 102.50 when you add, and now you no longer play with your own money, you are risking the house to make more.
 
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