I would like to discuss averaging down

Quote from Shanb:

Riffraff,

There are many different ways to trade. I know several traders who routinely add to losing positions and do very well. Of course it is all about context, and it requires experience to know in what context to add and what context to not.

I do not add to losing positions, ever. That is because it does not fit with my style of trading! Others, who have different styles may find that it fits them.

Check out the new Market Wizards book. jimmy Balodimas is the antithesis of what you consider to be good trading, but he has consistently made big figures throughout his career. He routinely adds to losing positions and fades trends!

Also, no offense but I can tell that you aren't currently trading for a living. Just by the way you are talking about things, my gut is telling me it is very unlikely! T3 is a great source as well. Sperling is prob one of the best equity guys out there, but do not think that their edge comes from your supply and demand levels or your neatly fit rules about market action. It comes from experience and creating a trading process that fits them.
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Shanb,

I take no offense... I find it comical to say the least however your deduction.

I am a full time directional options trader. I trade highly liquid weekly options intraday... flat end of day... in high beta equities... deltas of .90 and higher as a surrogate for the stock. The leverage allows me to have significantly less capital at risk in the market (eliminating black swan event risk)... all the while allowing me to capture virtually all of the movement of the underlying. Since almost the entire premium is intrinsic-- I do not contend with the effects of time decay nor IV swings. I base my entries and exits on the charts. I trade only 8 equities. I have multiple levels updated daily after market. I also track levels in IWM SPY QQQ DIA. I trade breakouts... counters... and trends on pullbacks. There are key criteria that determine whether a level has a higher probability of breaching or being honored. Bottom line-- I trade on the hard right edge... forward looking price. Looking to the left tells me where supply and demand exists.. but only the hard right edge dictates what side of the trade Im on. I am proper positioned size-- so it doesnt matter if my stop is .50 away.. 1.22 away.. or $ .30 away. My rule based trade plan is 44 pages currently.. and has been updated about 7 times in the last year. This is my livelihood.

Sorry to disappoint you-- but you are way off base.

I am very familiar with Redler... Laz... Sperling...Levay... Lee... and Renzulli.


It never ceases to amaze me the arrogance of the ET senior alumni here... a dissenting opinion comes in and you automatically presume that you know everything about the dissenter.

You havent a clue Shanb.. but thanks for the amusing post.
 
Quote from riffrafffpatrol:

Umm...no there wasn't. Price broke out to an all time high...the previous area of supply was breached. There was nothing above that gave you a reasonable expectation where price would turn. This is not subject to debate-- it is fact.
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Fact based on what? Have you backtested it, or just read it somewhere? In 1999 shorting all time highs was a death wish. In today's market the hft's (and me) are happy to add supply to the retail traders that have buy stops based on TA...with exception to momo stocks like AAPL GOOG LNKD etc.
 
Quote from oldtime:

I don't know aqnything about stock pairs. There is some hedging, but I trade 4 pairs, two long, two short, but size on each individual pair is constantly changing independently of the others.

I would like to hear more about your levels. I don't really look at it as averaging down. But if you watched one individual pair it would look like that is what I am doing.

What I don't understand is if you did it on just one pair it may not be profitable, but if you do it on 4 pairs at the same time it seems to be. (1 loss in the last year.)
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Maybe it is best to take this discussion somewhere else than this thread because it doesn't contribute to it. But let me just say for now:

1. We may not be on the same page. Shouldn't be a surprise, we don't know each other's trading. Duh !

2. Forex is a currency trading market dealing with a pair of currencies, e.g., US/Euro. Is that you mean as a pair ? If so, I can see you as Long US and short Euro.

3. But I don't see you in US/Euro and let's say YEN/Swedish Krona and calling one long and the other short. Yet you say you can have 4 positions.....two long and two short.

4. Would you go long the dollar as in US/Euro and short the dollar as in Australian dollar/US dollar. This would represent one position long and one short ?

I don't understand your meaning on the last paragraph. Are you referring to me or referring to you in order to make your point ? Also, I am not sure what your point is. I don't have a picture in my mind what your are saying. LOL

This may give you some insight: I am recommending you read the first week of posts on the Journal forum that has a thread called Pair Trading Strategy Journal (Johnny Sharp started it 4 years ago.) The thread was fantastic about pairs trading. The thread died early this year. I am now almost the only poster on it. I would recommend my first post which was Aug 12 that starts with "reminising" and my other posts to the end of the thread. It would be a quick way to understand and probably answer the most general questions you have.

http://www.elitetrader.com/vb/showthread.php?s=&threadid=134253&perpage=10&pagenumber=272

Thank you for your post directed to me ! I would be more than pleased to respond and/or direct you.
 
Quote from Dustin:

Fact based on what? Have you backtested it, or just read it somewhere? In 1999 shorting all time highs was a death wish. In today's market the hft's (and me) are happy to add supply to the retail traders that have buy stops based on TA...with exception to momo stocks like AAPL GOOG LNKD etc.
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Dustin-- when I speak of supply.. I am referring to resistance. However when one thinks of resistance-- they think in terms of absolutes. Rarely does a resistance line play out to the penny. That's why it is prudent to look at zones-- areas where price has a high probability of reversing. Not all zones are valid however. And not all valid zones hold up. However-- all zones provide a reference point with which to trade against. Your trade did not. One does not need to backtest this or read it somewhere to figure this out.

You simply were shorting and shorting and shorting as price continued to go against you.

AFTER price turned.... it revisited the new supply area-- now you have a valid reference point area with high probablity of a reversal.

Look at some of my posts to logicman in my history.. I gave numerous examples.

Your trade generated a very minimal profit. Going in full position against a pivot reference point allows for maximizing gains.. all the while maintaining risk at 1R if done properly. The risk:reward here was easily 1:2/1:3... yours was no where close. If I'm wrong.. I am out... the first stop is the cheapest.

You still havent answered the question I posed earlier-- how far would you have let price go against you... and how many more adds would you have made-- before you threw in the towel?
 
Quote from riffrafffpatrol:

Dustin-- when I speak of supply.. I am referring to resistance. However when one thinks of resistance-- they think in terms of absolutes. Rarely does a resistance line play out to the penny.a?
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you think in terms of absolutes,faders think in terms of grey areas,this might be your mental block for understanding other styles of trading different from your own,you refuse to accept any theories but your own,i think in gists,areas and that is close enough,my mind won't except absolutes so this conversation is never going to meet a happy medium, stick to your theory's and rules if that is what fits you,there is no one size fits all when it comes to trading..... trend lines do tend to hold more often than not,often enough to fade profitably
 

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Quote from riffrafffpatrol:

Daring... I fail to see your point.

There is no supply overhead when Dustin started his entries... period.

Are you referring to the trend line? That does NOT represent supply.
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according to who? it does until it doesn't, so your statement is false,, it hit the tl and pulled back 77 cents
 

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Quote from riffrafffpatrol:

Here's the only thing I know with 100% certainty--- when I'm wrong on a trade. As for when I'm right--- I have no idea in advance-- because uncertainty exists every time I pull the trigger.

But what I do know with a high probabillty of success is where high probability areas of supply and demand exist. And I know risk mgmt.

That's it.

It always is fascinating to me on the human reaction to dissent. Thx for not failing to disappoint.
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you said you go home flat so your high prob areas are in a 30 or 60 minute time frame and i'm sure you have comfort levels with being flat at close,that is a great way to trade and you can make a good living at it but the same rules apply to larger time frames areas of high probability and swing trading,do you accept that as a fact
 
Quote from ammo:

you said you go home flat so your high prob areas are in a 30 or 60 minute time frame and i'm sure you have comfort levels with being flat at close,that is a great way to trade and you can make a good living at it but the same rules apply to larger time frames areas of high probability and swing trading,do you accept that as a fact
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Absolutely. I would contend however that significant levels more prominently visible on the larger timeframes have more weight... and that trading in the direction of the big picture prevailing trend of the larger timeframe helps increase probabilities of a successful trade on the smaller time frame. But yes-- sound rules involving high probability, high profit potential and low risk setups can be applied on any timeframe.
 
Quote from ammo:

you think in terms of absolutes,faders think in terms of grey areas,this might be your mental block for understanding other styles of trading different from your own,you refuse to accept any theories but your own,i think in gists,areas and that is close enough,my mind won't except absolutes so this conversation is never going to meet a happy medium, stick to your theory's and rules if that is what fits you,there is no one size fits all when it comes to trading..... trend lines do tend to hold more often than not,often enough to fade profitably
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Ammo- I just referred to "zones"... which are not absolutes. I am on the same page with you... high probability "areas" if you will.

The decision I have to make for a fade once price nears entering a high probability area of supply or demand is:

a) Look to enter just as price enters the area... with no visible sign of reversal as of yet... nonetheless with confidence that my stop loss location at the extreme is valid.

b) Look to enter in anticipation of price getting deeper into my zone... preferably followed bu a signal of reversal... such as a hammer for example one time frame below... allowing me to increase my position size due to a lower 'entry to stop loss' distance than the first example.

c). Wait for confirmation as price reverses once it trades within the zone - with the trigger entry occurring once price exits the zone. This option results in my lowest position size out of all- as stop distance is at its extreme here. Hence - my profit potential is reduced somewhat... while my risk remains the same due to position sizing accordingly.

Now herein lies the caveat with waiting for price to get to a zone-- it may never quite get there-- perhaps my zone is too tight.... price reverses w:o me on board. And that's ok for me-- because I know the probabilities and profit potential of waiting for extreme areas with full size are far higher than merely trying to enter in small pieces before a move has been finished--- what purpose does it serve if I only get a small chunk on small size with price then moving in my intended direction- my profit factor becomes skewed. And if price continues toward my zone-- I still end up paying a higher overall price than if I just waited for the extreme entry zone in the first place.
 
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