Because adding once is sufficient in 100% of the cases to get a scratch if you are DD,if not,you can add to infinity and the price may never get it back.Pyramiding also doesn't help.Just add once and see how it goes.
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Increasing Size During Drawdown
- Thread starter oldtime
- Start date
Because adding once is sufficient in 100% of the cases to get a scratch if you are DD,if not,you can add to infinity and the price may never get it back.Pyramiding also doesn't help.Just add once and see how it goes.
Quote from TheMagican:
Because adding once is sufficient in 100% of the cases to get a scratch if you are DD,if not,you can add to infinity and the price may never get it back.Pyramiding also doesn't help.Just add once and see how it goes.
It still sounds like you are adding once "just because". Kind of a "well it hasn't worked out yet so let's double the position and hope it recovers half way so we're back to break even".
I'm suggesting that the only reason to add to a losing position is if fresh analysis suggests that by doing so you will be increasing your positive expectancy. If there is no edge increase, then the trade is pointless. Even worse if there is an edge decrease, then the trade is actually counterproductive. But if there is an edge increase in a second, third, or forth addition, why pass it up based on some arbitrary rule that you only add once?
My approach is to size the initial trade in a manner that will allow for size increases any time fresh analysis indicates an increase in edge. If the edge has neither increased nor decreased, the position size stays the same. If the edge is gone the position is offset and I move on. But there are times that it is an expected part of a trade to add up to ten more times depending on the numbers. Other positions only allow for one or two increases.
Fresh analysis will always suggest you to add.But I only add once,and if the price falls out into the zone.If it doesn't recover from that zone I see no reason to add more,I either wait till the closure or close it out.Ive spent thousands of hours testing martingaling on the different levels with all that jazz.What you are saying is just another way of guessing and hoping.That "fresh analysis" will blow your account at some point.
Quote from TheMagican:
Fresh analysis will always suggest you to add.But I only add once,and if the price falls out into the zone.If it doesn't recover from that zone I see no reason to add more,I either wait till the closure or close it out.Ive spent thousands of hours testing martingaling on the different levels with all that jazz.What you are saying is just another way of guessing and hoping.That "fresh analysis" will blow your account at some point.
If fresh analysis always tells you to add, then your model is broken and you have no edge.
Quote from Mtrader:
In flipping coins there is never a trend.
If the Dow goes up 50 days in a row there is clearly a trend.
You cannot compare flipping coins with trading the Dow.
I think in trading the sharp ratio is very important. So you now what to do to keep the ratio on a good level.
You missed the point of his post. He was referring to quants. Quants are typically not trend traders. Most base trade signals off probabilities and some variation of stochastic processes. So to them it is very much like a complex version of coin flips.
Quote from Epic:
If fresh analysis always tells you to add, then your model is broken and you have no edge.
'If-Then' doesn`t fly in my world as i don`t think as you think. And it`s clearly that your confused yourself. It confirms by you saying this:
'I add sometimes once,other times two times,another time three times,there is a time when i add even four times...'
Quote from TheMagican:
'If-Then' doesn`t fly in my world as i don`t think as you think. And it`s clearly that your confused yourself. It confirms by you saying this:
'I add sometimes once,other times two times,another time three times,there is a time when i add even four times...'
I add ONLY based on my model telling me that doing so will result in increased expectancy. Simply getting a lower price doesn't increase expectancy. It may or may not increase probability of profit, but that is only part of the equation.
Before taking a trade, each is very well quantified in my model. It must have a positive expectancy of at least 15%. If adding to the trade gets that to 18%, then I add to it. If adding to the trade would result in it either staying at 15% or dropping to 10%, why would I add?
What is your expectancy on each trade? What is your expectancy after you make your one addition?
Quote from Epic:
I add ONLY based on my model telling me that doing so will result in increased expectancy. Simply getting a lower price doesn't increase expectancy. It may or may not increase probability of profit, but that is only part of the equation.
Before taking a trade, each is very well quantified in my model. It must have a positive expectancy of at least 15%. If adding to the trade gets that to 18%, then I add to it. If adding to the trade would result in it either staying at 15% or dropping to 10%, why would I add?
What is your expectancy on each trade? What is your expectancy after you make you one addition?
The first paragraph.
My model tells me to do so every day,Epic,i wonder why doesn`t yours?.You think it could be another way?.I use some banal,regular stuff to trade with,btw.There are very few variables in my model.And it always increases probability of profit as well as loss.But i do the same thing over and over, and over again.
The second paragraph.
I`m not quantifying anything.All i do is i exit when the move is exhausted,or i exit at the closure if i`m underwater,or if the price exceeds the limit i set.
The third paragraph.
1.100%.2.Same
But, and i hope you are aware of that, the crowd is sometimes right.It must be right,sometimes.
But,it doesn`t bother me,as i know that i`ll get it back-in spades!
Let the crowd be 10 times in a row right,it still doesnt bother me,as i know it`s temporary.
Quote from TheMagican:
The first paragraph.
My model tells me to do so every day,Epic,i wonder why doesn`t yours?.You think it could be another way?.I use some banal,regular stuff to trade with,btw.There are very few variables in my model.And it always increases probability of profit as well as loss.But i do the same thing over and over, and over again.
The second paragraph.
I`m not quantifying anything.All i do is i exit when the move is exhausted,or i exit at the closure if i`m underwater,or if the price exceeds the limit i set.
The third paragraph.
1.100%.2.Same
But, and i hope you are aware of that, the crowd is sometimes right.It must be right,sometimes.
But,it doesn`t bother me,as i know that i`ll get it back-in spades!
Let the crowd be 10 times in a row right,it still doesnt bother me,as i know it`s temporary.
I'm confused by your response. Do you understand the concept of expectancy? If your system has an expectancy of 100%, you literally have the holy grail, and should be a billionaire.