Tell me why averaging down is a bad idea .

[Overnight]

Ever notice the warped self-destructive tendency for traders to add to losing positions under the delusional guise of “averaging” - but only the smart swinging dicks seem to be the ones to keep their powder dry when they’re underwater but then they press the living shit out of winning positions.

The allure of the averaging idea is strong, VERY strong. But there will come the day when it will destroy the participant. It is a horrible crash.

 

[bone]

The allure of the averaging idea is strong, VERY strong. But there will come the day when it will destroy the participant. It is a horrible crash.

I’ve seen it all too often. One of the very best Bond Pit Traders - Chip Kenyon, called it a ‘disease’.

From what I’ve seen over the years, it’s the primary cause for traders having monster down days - like giving away a month in a day or much worse.

 

[Overnight]

I’ve seen it all too often. One of the very best Bond Pit Traders - Chip Kenyon, called it a ‘disease’.

And as much as I have turned myself away from the idea, I do admit that I attempt it in the micros. I did so this week. It is such a strong pull. Like the new EM catapult on the USS Ford aircraft carrier.

What a poison pill it is. Evil nasty taunt it is! The mental discipline to escape it, once it has a hold of your brain, is immense. Bleh!

But in the minis? NO WAY. Would need millions in the account for that.

 

[bone]

And as much as I have turned myself away from the idea, I do admit that I attempt it in the micros. I did so this week. It is such a strong pull. Like the new EM catapult on the USS Ford aircraft carrier.

What a poison pill it is. Evil nasty taunt it is! The mental discipline to escape it, once it has a hold of your brain, is immense. Bleh!

But in the minis? NO WAY. Would need millions in the account for that.

If you can wait for a position to turn green and then ADD to it - the worm will turn for you. If the market’s really moving you might have to step out and hit a bid or lift an offer but that strategy can build fortunes.

 

[Overnight]

If you can wait for a position to turn green and then ADD to it - the worm will turn for you...

Yes, that is a whole other ball of wax. Scale into a winner, or just take the profits there and then. Decisions, decisions.

 

[volpri]

Oh the allure and the subsequent pain of averaging down in MES this morning during a few moments of free time....ad nauseum..38 trades. 100% profitable. all winners. NET after comm +$294.89 MES you know. Tiny MES. all long entry trades. 19 contracts traded long 19 exited.
unbearable pain….

 

[volpri]

Yes, that is a whole other ball of wax. Scale into a winner, or just take the profits there and then. Decisions, decisions.

scaling in to a winner will generally not work for a scalper in the ES.

 

[CALLumbus]

averaging down is a great strategy so long as you cut loss and also are good at picking great times to enter or exit. take all trading rules and do the opposite

Thats exactly how I make my bread, day by day. But most people dont want to listen, at least not listen to something they dont like or understand.

It is like with most things in life. If you want to be different, you cannot run with the crowd. You have to do the opposite, just like you said. Easier said than done, and too hard for most people. But thats just how nature, the world is made.
There is not enough space for everybody on the top of the mountain. Most people are placed in the belly of the bell curve (https://en.wikipedia.org/wiki/Normal_distribution), and most of them just like it to be there. A nice, safe and easy place.

 

[CharlesS]

38 trades. 100% profitable. all winners.

volpri, your posts are so instructive.

I wonder how long it took you to develop this approach, what led you to it (Brooks ?) and was frequent trading like this instinctive from the start, or did you have to work to develop it ?

 

[ironchef]

REDP1800 said:
averaging down is a great strategy so long as you cut loss and also are good at picking great times to enter or exit. take all trading rules and do the opposite

Thats exactly how I make my bread, day by day. But most people dont want to listen, at least not listen to something they dont like or understand.

It is like with most things in life. If you want to be different, you cannot run with the crowd. You have to do the opposite, just like you said. Easier said than done, and too hard for most people. But thats just how nature, the world is made.
There is not enough space for everybody on the top of the mountain. Most people are placed in the belly of the bell curve (https://en.wikipedia.org/wiki/Normal_distribution), and most of them just like it to be there. A nice, safe and easy place.

I tried: GE, TEVA TSLA, SNAP, KHC and GM (prior to bk).