I would like to discuss averaging down

[actionzip54]

I think you should ask yourself wether you want to average down because you don't like taking losses or because it will increase the profitablity of your edge.

Honestly, if you have to come to a forum and ask this question it's probably because you don't like taking losses.

 

[Daring]

Quote from actionzip54:

I think you should ask yourself wether you want to average down because you don't like taking losses or because it will increase the profitablity of your edge.

Honestly, if you have to come to a forum and ask this question it's probably because you don't like taking losses.

It's not about losses, obviously even with averaging down there will be losses, that max monetary line in the sand that I have discussed.

The reason for such position management I think it's obvious. In my case it is typical to have a good read in direction but watch multiple areas of potential support or resistance, quite hard to determine which is the one that will finally produce the reversal.

You could argue to try and retry and re-enter but then that leaves me vulnerable to my worst enemy ever, messy action leading to the death by a thousand stops.

I think that explains it quite clear and would be surprised if I was alone in this subject.

 

[eurotrasher]

Quote from Daring:

I don't think see how your example has any relevance.

No technical analysis applied, you implying there was not a maximum monetary stop loss and you are assuming everything would be purely position management, in this case, averaging down.

What if you read into the RIMM downtrend, and the averaging down was applied from the short side?

Sorry but you are totally off base here.

here's some tech for ya.

a retail trap ipo price rise on lower volume and 3 moves to a top.

a blow off exhaustion gap reversal thru the 14.50 level

classic reverse h and s death spiral to the 4.2 expansion

lots of pain and still no gain.

of coarse you are a short trader................

carry on.

es

 

[ammo]

Quote from Daring:

In the past I tried trading using fixed stops and many times I went through a painful series of small stops, infamously known in trading circles as death by a thousand stops, particularly when price is chopping, something traders using averaging down would be immune too.

They say your trading method should be one that you are ok with it psychologically. Personally, I'm not ok with getting stopped over and over again, I rather improve my position as volatility presents opportunity and then decide where and how to close it. If you notice when you get stopped, you not just accepting defeat but you are closing at unfavorable areas.

I definitely do not advocate averaging down into infinity, I think the emergency stop should be something related to past monthly performance. A trader must live to trade another day/week/month so preservation of capital must be part of the money management plan, even if averaging down.

I think one of the least talked aspects of trading is that when we take a stop we are taking it at the worst possible area, when it's totally against us and inconvenient for our pockets.

It is possible to realize one is wrong but wait for the right time to close it, even if it's still a losing trade, at least at places where it is less inconvenient.

I would like to reach out to other traders that favor averaging down and manage their stops based on price movement and not fixed areas and perhaps share ideas and concepts.

[to be continued]

why would you want to scalp or average down and why did you place your stop there, why did you enter, what was your profit target...stops seems to be the crux of the op's,that is my reason for averaging, it seems the bots are hunting the stops.. if you take your avg monthly profit and divide it by 20,i would rather take it all at once than give back half in dribs and drabs over 20 days,assuming one is profitable 50% of the time

 

[oldtime]

every serious trader who averages in has looked at those charts of trends that move and never correct. The difference is, we think long and hard about how we will handle it instead of dreaming someday we will be on the right side of it.

just because you average down doesn't mean you won't make more money than you ever dreamed of the few times it trends in your favor.

but most of the time it will just bounce around (chop) until it takes out everybody's stops, long or short. Then it will move, maybe in the same direction, maybe back the other way.

 

[Daring]

Quote from ammo:

why would you want to scalp or average down and why did you place your stop there, why did you enter, what was your profit target...stops seems to be the crux of the op's,that is my reason for averaging, it seems the bots are hunting the stops.. if you take your avg monthly profit and divide it by 20,i would rather take it all at once than give back half in dribs and drabs over 20 days,assuming one is profitable 50% of the time

Same reason as you, and even though you can re-enter this does not absolve you from getting chopped to death.

I like to lose when I'm wrong, not when price is undecided.

At the same time, I would like to point out that choosing mean reversive instruments helps and/or mean reversive time ranges like for instance, lunch.

It is easier to tell when an instrument is breaking a range (if against you time to take losses), than when a trending instrument is actually reversing and not retracing.

 

[RedTankEra]

I could be wrong here, but on one hand, the OP is asking for help, yet on the other he talks trading wisdom.

Any ulterior motives Daring or bad read from my part?

 

[oldtime]

Quote from RedTankEra:

I could be wrong here, but on one hand, the OP is asking for help, yet on the other he talks trading wisdom.

Any ulterior motives Daring or bad read from my part?

that's the way I read it, I told him how I do it and his reply was to tell me why that won't work. But then again, 99.99% of what I post on the internet is just bullshit, so when the .01% topic comes up that I am serious about I can see why nobody would take me seriously,plus, everytime this topic comes up it brings out the crazies, and I have no need to argue it or convince anybody, since the truth is most on this board CAN'T average down because they only have enough left to put on one unit.

 

[Daring]

Quote from RedTankEra:

I could be wrong here, but on one hand, the OP is asking for help, yet on the other he talks trading wisdom.

Any ulterior motives Daring or bad read from my part?

Most definitely a bad read, I'm exploring a topic, researching it, but I do have vast trading experience, so perfectly capable of doing my own thinking and research when it comes to other thoughts and ideas.

I don't take anything for granted but most definitely appreciate trading conversations and input from others.

 

[SatMir]

Quote from Daring:

Well a board veteran just testified that without averaging down he would be working at Burger King, and if you did your homework, as I did, Dustin is one of the most illustrious members of this board.

I think there is a difference between averaging down with a max loss in mind and averaging down into infinity, which is precisely what Dustin stated.

Like I posted on the beginning of this thread, one of the worst aspect of trading, at least for me, is when price goes into chop mode, this kills traders using fixed small stops, and especially with low volatiity, chop is more present than ever, this is something averaging down takes care of.

Obviously, a good knowledge of market structure is required to average down correctly, and according to experienced traders statements, the ability to average up correctly once things go your way, instead of taking profits is also imperative and no less important.

I got a lot to study, but I am grateful these people are pointing me in the right direction.

Once again, feeling comfortable with your trading style is important to perform with peace of mind. Frankly, I'm just tired of getting stopped over and over again because price became directionless, getting stopped when you not even wrong on direction, is a sin, except for brokers of course, so just trying to adapt a trading style that is compatible with myself, while becoming consistently profitable.

Just trying here, just trying.

There is no other way,besides the correct one,never mind the samples,trials and experiments.Do not fool yourself,this way you`ll blow up even faster.Or you can try and crack the correct way.The choice is not that big.Thinking of developing a system with the 'ave down' thought in mind is disaster.Think about the system which buys/sells few ticks above/below bottom/peak.