Tell me why averaging down is a bad idea .

kellys said:
So it is important!
What is your problem then?

You want me to do all the work for you?
More...

In what world do you magically start up +10 points? This is what I don't get. You pick the starting point AND you ask a yes or no question. lol

Positions start at 0, not up 10 points automatically. You still won't answer how you buy your initial contract or how you determine to exit your trade if it's not up ten points. Because if you're using any type of an edge, metric or advantage you know to do this, than that means it's possible to have an edge averaging down.

The only way that wouldn't be possible is if you told me your edge is so perfect and so strong that you know if it goes against you at all than you would exit, but one would think if your edge is really this strong why would you not just trade heavier at the start.
 
kellys said:
So it is important!
What is your problem then?

You want me to do all the work for you?
More...


Furthermore if we both buy a contract at 3000 but price goes to 2995.00 and I buy another, I now have two at 2997.50.... if prices goes to 3010 you now have 2 at 3005.00..... I have a 7.50 point better average than you. So, if it's just 50/50 anyways I am ahead.

Or am I suppose to believe your advantage is you saw price go from 3000 to 3010 so now you add one because that confirms you're in the right direction? but just a 5 point move down means that you wouldn't of been in the right direction? and would you exit your contract you bought 3000? because it went down 5 points? or are we okay to stay in still and wait for 3010 to add? and that still doesn't even solve how or why you bought your first contract... in the first place....
 
I don't think there is any advantage in averaging, full stop.
If you wish to place another trade, do so on another instrument, that way you at least get some diversity, averaging is like placing another chip on the same number of a roulette wheel.
 
themickey said:
I don't think there is any advantage in averaging, full stop.
If you wish to place another trade, do so on another instrument, that way you at least get some diversity, avaraging is like placing another chip on the same number of a roulette wheel.
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Well that's kind of my point... if trading is more akin to gambling and a roulette wheel to the individual , than I guess it doesn't matter either way. But some people do have edges in the market, whatever that may be. So, if you have an edge and price dips some and that edge hasn't changed it actually increases your profit factor to add lower (again assuming you have an actual edge).

I don't see why people think that's crazy or impossible, maybe I am getting trolled. At any rate I really have given it my best effort.
 
trdes said:
In what world do you magically start up +10 points? This is what I don't get. You pick the starting point AND you ask a yes or no question. lol

Positions start at 0, not up 10 points automatically. You still won't answer how you buy your initial contact or how you determine to exit your trade if it's not up ten points. Because if you're using any type of an edge, metric or advantage you know to do this, than that means it's possible to have an edge averaging down.

The only way that wouldn't be possible is if you told me your edge is so perfect and so strong that you know if it goes against you at all than you would exit, but one would think if your edge is really this strong why would you not just trade heavier at the start.
More...
In the magical world where we talk about averaging. Yes, the position AFTER initial.
You've forgotten that in your excitement to extract an edge from me.

I'm not telling you how I got to be up 10 points!
But I'd rather be up 10 points and averaging up than down 10 points and averaging down.
In fact the trade I'm down in I'm looking to get the feck out of, with haste!
I'm not looking to leverage the trade up after my edge failed. I'm certainly not looking to leverage the trade after multiple failures.

I have said this before, I trade market feedback.
If the market is telling me I'm wrong, then I won't make things worse.
If my edge is paying me, then I try to leverage that.

We have run 360 degrees.
When I move beyond that, I class that as time wasting.

I'm sure there are other guys looking to post other views.

All the best with your trading!
 
trdes said:
Well that's kind of my point... if trading is more akin to gambling and a roulette wheel to the individual , than I guess it doesn't matter either way. But some people do have edges in the market, whatever that may be. So, if you have an edge and price dips some and that edge hasn't changed it actually increases your profit factor to add lower (again assuming you have an actual edge).

I don't see why people think that's crazy or impossible, maybe I am getting trolled. At any rate I really have given it my best effort.
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Edges work out over a large number of trades, its a 'probability edge', but by and large, every trade taken individually carries a large degree of randomness.
In my opinion it is better to place one trade without averaging and just manage that trade, get in once, get out once.
An edge is not gained by averaging, an edge is gained from skill levels on what you buy, when to buy, when to exit.
Averaging is an illusion that it makes a difference.
My 2c.
 
kellys said:
In the magical world where we talk about averaging. Yes, the position AFTER initial.
You've forgotten that in your excitement to extract an edge from me.

I'm not telling you how I got to be up 10 points!
But I'd rather be up 10 points and averaging up than down 10 points and averaging down.
In fact the trade I'm down in I'm looking to get the feck out of, with haste!
I'm not looking to leverage the trade up after my edge failed. I'm certainly not looking to leverage the trade after multiple failures.

I have said this before, I trade market feedback.
If the market is telling me I'm wrong, then I won't make things worse.
If my edge is paying me, then I try to leverage that.

We have run 360 degrees.
When I move beyond that, I class that as time wasting.

I'm sure there are other guys looking to post other views.

All the best with your trading!
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Okay, I appreciate the time you took.
 
trdes said:
(again assuming you have an actual edge).

I don't see why people think that's crazy or impossible, maybe I am getting trolled. At any rate I really have given it my best effort.
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Do most retail traders have an edge?
What do the statistics say?

If a trader doesn't have edge, can you see how dangerous averaging down could be?
Especially if he indeed 'thinks' he has edge.
 
kellys said:
Do most retail traders have an edge?
What do the statistics say?

If a trader doesn't have edge, can you see how dangerous averaging down could be?
Especially if he indeed 'thinks' he has edge.
More...

Sure, no argument there. It's way worse to average down if you're not a top tier trader, have no edge and no plan. That will be a disaster.
 
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