I would like to discuss averaging down

[SatMir]

Quote from Daring:

I know just too many assumptions.

#1 You ran out of dollars ? Irrelevant when you have a fixed monetary stop

#2 Being able to tell the bottom is a pretty big assumption

#3 At no point the possibility of averaging down on a short position was even considered, why must it always be against the correct side of the market when samples are provided?

Just some thoughts, I welcome the discussion.

How do you know your fixed stop if you don`t know how far a move can extend?And why do you think that short is somehow different then long?

Your decision about averaging down is based on?

Whatever it is,consider the ''Doomsday argument'',and hyperbolic growth especially when you are at the end of the trading session.You might not run out of money,but you`ll run out of time.

 

[eurotrasher]

Quote from Wide Tailz:

Winners give winners time and room (up to a point) to launch.....

....without averaging down.

es

 

[ammo]

Quote from Daring:

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.

trending is easy to read using the internals,up vs down volume and adancing vs declining stocks,then a corrrelating instrument like spx with transports,spx and transports have major and minor support/resistance and on trending days it's good to watch major,6 or 7 day moves like the one that just ended ,use the minors,these points are also good spots to add /reduce an averaging position,personally,i just keep averaging short and catch the pullback to collect,in the spx, as it is a mean reverting index,that happens in aapl too but so seldom that the averaging wouldn't work.it would ,but the payouts would be a long wait and picking spots tougher

 

[eurotrasher]

Quote from oldtime:

you keep averaging down and you will finally buy at the bottom.

they are always cheapest at zero.

next up, government motors. lipstick on the pig is still a pig.

es

 

[eurotrasher]

Quote from SatMir:

You may find yourself lacking $1 dollar,before you blow.Why not buy at the bottom without averaging, anyway.

buy em all at zero.

it costs less and there really is no pain and suffering.

retail will never average up, only down.

they luv to lose, they just lose.............

es

 

[ammo]

Quote from Daring:

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.

the houses average up all the time and then race to collect profits on the turn,resulting in fast drops,so there is nothing wrong with averaging,there are experienced people doing dangerous jobs everyday and the more dangerous, the more experience necessary, higher risk, and higher pay,in the current economic environment, averaging up is imho the more dangerous of the two,there will be more sellers on the way up when wrong than buyers on the way down

 

[Rol]

I think you need specific entry and exit criteria when averaging, as well as position sizing rules that are established before you even put on the first trade, robot like. Not while in the midst of the trade, which is why I automate the whole process. And don’t let the position get so big that it becomes too emotional. It helps to follow any news related events to try and anticipate how they may affect future direction. I like it when a stock is tanking before an earnings report and then see it spike on the release. It looks like price manipulation to me, so I can anticipate a sharp turn coming.

 

[Wide Tailz]

Quote from eurotrasher:

....without averaging down.

es

Would this example suffice?

 

[Wide Tailz]

For reference, that is a cropped pic from this thread (second to last post on the page)

http://www.elitetrader.com/vb/showthread.php?s=&threadid=223293&highlight=Fibonacci

 

[eurotrasher]

looks like pure technical trading using simple chart structure.

nice thread.