Hindsight is always 20/20.
The problem is that the market often moves against you even after you average down. Why? BECAUSE YOU GOT THE DIRECTION WRONG. If you're smart, you'd get the hell out by then. But no, you keep adding more to the losing trade. But it doesn't matter because you'll never tell about it--certainly not here for everyone to judge.
Well, I won't say "good luck". Just don't stick your head too deep in the sand.
Go to my journal. You will see some trades there on averaging down to see how I do it if you are interested. But you probably aren’t interested as your mind seems to be made up about the matter.
I may post trades made today later. I actually took one showing “how not to scalp intraday” and took it on purpose as a teaching concept. I scaled in as price moved IN my favor. Well ...thats what the gurus say to do ROFLMAO. It doesn’t work so well with scalping. It can with investing. Or multi-day swing trades.
Listen, in intraday trading especially when scalping 1 to 8 points there is a difference in getting the direction wrong and getting an early entry followed by some adverse entries. I trade with a premise or logical reason for making the trade in the FIRST PLACE based upon contexts, larger and immediate, and price patterns. I have a stop at the point where I think my premise is wrong. I will average down up to or near that point. If it gets breached. Then yes I am out. The direction is wrong. So, if I get stopped out I will then double or triple up and go in the correct direction and get my loss back quickly and usually soon in a handsome profit very soon.
See, I can get the direction right but an early entry. So adding to the losing EARLY entry:
1) it allows to get at least SOME POSITION ON from the get go, even if no averaging down opportunity presents itself after the original entry. Even if it is a bit early at least I am in, albeit with a smaller position and not my larger desired position size. Yes, I could just put a full position size on to start with, at one wack. However, I know that I am trading in a band of 40% to 60% probability. That means that at the moment on ANY first entry there is a good size chance I will see some adversity before I am out with a profit, regardless of how well the setup entry appears to be. So, I can TAKE ADVANTAGE of that momentary adversity by averaging down. Playing the markets is not so much a precision thing but more a probability thing coupled with flexibility. That is why all the guru’s who spout super high probability precise setups are full of BS. But that is what the novice wants to believe. It is TOTAL BS.
2) keeps me IN THE TRADE on a little adversity. I’m not getting whipsawed. I am building a viable position based on market logic for the session.
3) as I add to the losing position it lowers the break even point in ADDITION to making price movement BACK to profit actually a LOT LESS.
4) It allows me to keep getting in ON A GOOD trade, at CHEAPER prices as price goes against me. Thus I am building a position incrementally, in adversity, as long as my original premise for getting in the trade is still intact
5) It tends to render a HIGH win rate. That is a real confidence booster.
6) it allows me to COMPOUND previous profits made in the same session.
