I think everyone understands that adding to winners should be done with equal or smaller size, since adding bigger size will raise your average cost by too much and a small pullback will turn it into a loser.
I know that Anek said adding to winners is the most powerful money management strategy around, however he said this in the AHG1.0 doc and as I understand it they don't trade that way anymore. They may still average in, though. They said that even if the last add or two end up being losers, overall the trade will still be a big winner.
That makes sense to me if you manage to catch a big trend that has many HHs and HLs and you add at each pullback (assuming you can tell when the pullback is over and the trend is about to resume).
Does adding to winners only work if you can tell when trends are coming? Seems like if price doesn't make a big trend, adding to winners is a losing strategy.
I never have any idea when a trend is coming or how long it's going to go. I have a big post on my blog about why I never add to winners, but I'd like to talk about this strategy and see if I can understand what I'm supposedly missing. Or is it one of those things that sounds good on paper but isn't really helpful in real life (like trailing stops)?
Question: when you add to winners, how do you know when to close the trade?
A violation of HH/HL doesn't seem to work. Price seems to go wherever it wants and doesn't care about making a LL in the middle of an uptrend.
I've also often noticed that a LL after an up trend, even if it is the start of a downtrend, ends up being so far away from the high that your winners turned into losers if you wait for it.
So unless you happen to get a textbook trend, how is adding to winners profitable?
I know that Anek said adding to winners is the most powerful money management strategy around, however he said this in the AHG1.0 doc and as I understand it they don't trade that way anymore. They may still average in, though. They said that even if the last add or two end up being losers, overall the trade will still be a big winner.
That makes sense to me if you manage to catch a big trend that has many HHs and HLs and you add at each pullback (assuming you can tell when the pullback is over and the trend is about to resume).
Does adding to winners only work if you can tell when trends are coming? Seems like if price doesn't make a big trend, adding to winners is a losing strategy.
I never have any idea when a trend is coming or how long it's going to go. I have a big post on my blog about why I never add to winners, but I'd like to talk about this strategy and see if I can understand what I'm supposedly missing. Or is it one of those things that sounds good on paper but isn't really helpful in real life (like trailing stops)?
Question: when you add to winners, how do you know when to close the trade?
A violation of HH/HL doesn't seem to work. Price seems to go wherever it wants and doesn't care about making a LL in the middle of an uptrend.
I've also often noticed that a LL after an up trend, even if it is the start of a downtrend, ends up being so far away from the high that your winners turned into losers if you wait for it.
So unless you happen to get a textbook trend, how is adding to winners profitable?
