I would like to discuss averaging down

I haven't read the whole thread but here is my take.

It makes no mathematical sense to avg down unless your position size exceeds the amount of liquidity available at the price you are willing to pay.

This shouldn't be a problem for many at ET :)

It may help some psychologically.

I saw someone say averaging down reduces slippage because limit orders are used . Limit orders can still be used when not averaging down so I don't see the difference in that aspect.
 
Quote from oraclewizard77:

I did turn a losing trade into a winning trade by averaging down once today, but it would have been better to just get long 1 contract at the correct price level or to short where I 1st went long.

I went long for a scalp trade in CL. The trade went against me around the same ticks as I wanted to make. However, it was now at the price level where my real setup tells me I should probably go long.

So at this point, I have the choice of bringing down my stop, taking the loss, or adding another contract.

I decided to add another contract and averaged down my cost with my stop now at the point where the market shows me I am wrong to be long and should have instead gone short.

The market approaches BE and then goes back down a little. I felt I could now reduce my risk a little if it goes back to BE so got out at BE -1 for 1 contract.

Now at this point I move my stop for last contract up a little but leave trade room to breath and bring the target down from where I had it for the original contract on when I got in this trade. At this point I am willing to either take the standard stop or target profit for this trade. I did not want to again go long a 2nd contract if it approached my stop since at that point the market would have changed its trend for sure.

So I walk away from the computer and I am able to get out at a profit for this trade. I then switch from real money to Sim to practice for the rest of the day a few more scalping trades.

Like I said, I still think it would have better better for me to wait more patiently for a valid trade setup then get in too early, however I am obviously happy to make a profit for the day. I do think you can average in once in a trade if you are still above the price where the market would prove the trade to be incorrect. It's also possible to scale in and out. For example, you want to go long or short and average a little into the trade as part of your plan or while you are managing the trade like I did. The best way is when you correct in the trend, and can get both contracts out at profit rather than reducing risk at BE for 1 contract. For the most part I don't think averaging in is good since for example if market kept going straight down I would have taken a much bigger loss on this trade than I normally take for profits. However, I did realize in the middle of the trade, that at the place my stop was would have been the correct place to go long and so I did.
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your first responsibility is acct management, so you can keep the store open during bleak times,averaging is fine as long as it is within your size and loss parameters,so is any other type of trading,at this point you have to use the style of trying that fits you best and maxes your returns,for instance , i can't scalp well,so if i chose that method,it would obviously be a mistake, if there is another style i am better at,assuming risk is the same,profit would be larger
 
You have to take into account win%. If you have a high enough win%, risk vs reward can be even and sometimes risk can be greater than reward. This is important since whenever one trades, one needs to pay commissions. So if most days and trades can be winning, you get 2 benefits, you are not paying lots of commissions for losing trades, and psychologically its easier to trade when mostly you win. I would say the only issue is not to revenge trade on a day where you finally take a losing trade, it may just be a bad day where your normal setups are not going to work for the day, and its better to trade another day. I do notice some days all my setups work and some none of them work. I am not at the point like NoDoji where I can just trade and wait for every setup throughout the day. I would not mind be at the point where I can hold some contracts for more profit.

Quote from ammo:

your first responsibility is acct management, so you can keep the store open during bleak times,averaging is fine as long as it is within your size and loss parameters,so is any other type of trading,at this point you have to use the style of trying that fits you best and maxes your returns,for instance , i can't scalp well,so if i chose that method,it would obviously be a mistake, if there is another style i am better at,assuming risk is the same,profit would be larger
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Quote from oldtime:

the thread topic is averaging down

since riffraff declared that he doesn't need to average down he has decided to change the topic to the way he trades

because if you do it like he does you won't need to average down

so if anyone wants to know how to trade

just point them to the average down thread

hey riff raff can you suggest a good thread I can go to where they discuss averaging down? I'm sure you can since you seem to know everything
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Ahhh yes.. the sarcasm continues.
 
Quote from ammo:

Quote from riffrafffpatrol:

By the way ammo- trendlines are extremely subjective. ................. when you draw chart using monthly or weekly or daily highs and reduce it to a 30 minute it rarely stops on the dimw

Pivot supply and demand are 100% absolutes- no gray areas.. no subjectivity involved. A big big difference in and of itself.......................you mentioned empirical,is there one empirical way to determine pivots or is that subjective
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ammo... what r u trying to ask? A pivot is a pivot... clear cut and dry. Objective. Cannot be disputed. No subjectivity involved.
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Quote from Slave2Market:

For a trader who supposedly trades off clearly defined hard levels with high probability it sure seems funny that you don't require any proof of success from your Mentors. This reminds me of the insurance commercial on TV where the girl has a date with a supposed French model ... it's true because she read it on the internet.

You also state that your trading uses clearly defined triggers like candle patterns. Well, it doesn't take a new trader very long to figure out that candle patterns are NOT consistent on short intraday time frames. One man's Hammer can show up as another man's Hangman or Doji; it all depends upon which data feed and charting package they use ... along with a whole bunch of other variables.

It also appears that you don't seem to experience slippage like normal traders. One of the reasons why averaging into a position can help a strategy is that it allows a trader to enter with limit orders and experience no slippage. Any trader knows that exiting a position with a tight stop loss is a joke when a stock makes a sharp price move.

You seem to think that averaging down is 100% bad even though you have an extremely subjective trading strategy and have no method of even determining whether it would hurt or help your trading.

In regards to Snake Oil salesmen - I would pay a lot of money to learn new trading techniques that actually worked. I've been trading a very long time and unfortunately I have yet to find a single web-site full of gurus that actually "Shows me the Money!" They all love to make calls and talk about winning trades but "NEVER" do they show their results! I like to pull back the curtain before making my decisions i.e. the Wizard of Oz.

Your screen name is "riffraffpatrol" … I find that quite ironic.
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Slave-- you aren't getting it. My trigger is based on supply and demand and the hard right edge. My zones are mapped on a 15 min time frame. I also map hourly zones. I use the 5 min for ideal entry-- that is where I will look for a reversal candle often.. however I am not trading based on a certain pattern. I watch the daily chart strictly to see where price is relative to major moving averages. I have trendlines drawn on the hourly 15 min for reference... but first and foremost-- I trade based on where supply/demand exists on the chart... COMBINED with where the indexes are and if they are currently in demand or supply. Relative strength/weakness is extremely instrumental in which trades I take.... net change from prior close during the premarket-- then net change % from open relative to the market... then finally from the hard right edge of forward looking price. Continue to think you've got me figured out-- it is very amusing to say the least. The feathers here sure are ruffled... wow! LOL

I truly don't believe you fully understand the strategies that T3 employs. I don't need to see a formal trade record. I have enough proof after being on their site for almost 2 years on the tactics they use and the effectiveness of them. Virtual trade floor... twitter feeed... prricepiont sheet... off the chart newsletter... morning call videos.. daily recaps.. all the levels are given each and every day-- it doesnt take rocket sciience to figure out if their analysis is sound or not. Again-- whether I subscribe to T3 philosophy or not is irrelevant.... amusing that you are so obsessed with this issue.

Your comment about charting packages having different patterns visually is absurd. If you are in the same time frame-- its all the same... albeit for a technical glitch. A hammer on a 5 min is in no way shape or form confused on another package with a hanging man (this is location issue.. the candle obviously looks the same). And I'm not sure what patterns you are looking at... but there are certain patterns that are extremely reliable on the shorter time frames... IF you are using mutiple time frame analysis and consider the context along with the context of the market.
 
Quote from riffrafffpatrol:

ammo... what r u trying to ask? A pivot is a pivot... clear cut and dry. Objective. Cannot be disputed. No subjectivity involved.
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asking what mathematical formula you use for a pivot, is there only one emperical formula known to the trading world,or several subjective ways to arrive at it,hourlys ,weeklies,15 minutes,seems there is a little room there to have more than one empirical head kahuna ...which one is empirical
 
Quote from ammo:

asking what mathematical formula you use for a pivot, is there only one emperical formula known to the trading world,or several subjective ways to arrive at it
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I am not referring to "floor trader pivots" ammo.
 
Please do not derail and be considerate, the main topic remains, Averaging Down.

If you would like to discuss pivots, or trendlines, or pink elephants, please begin your own discussion.

Thank you
 
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