Tell me why averaging down is a bad idea .

joker542 said:
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That's exactly what I am trying to do . So if there is any news I am out . If it goes against me like 5% I am out , and also since I have added to my position when it moved against me , my average loss is around 2.5-3%.
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"Any news"? How do you define that? You certainly can't backtest it...or design a forward-testing rule for "stop out due to news." It also sounds like you'll be stopping out frequently. I'm not sure if you'll hold positions overnight...if you do, that's another big risk. It all sounds nice in theory, but those small wins don't add up as much as you think, and you have commissions/fills to consider with all those trades.

Also, it sounds like a system designed for the very bullish, mostly low-volatility conditions we've had since 2009, too. Good luck if market conditions change. 5% drops happen all the time in bear markets...even in mini-crashes like we had in Feb. and Dec. of 2018.
 
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averaging down and up is what winning traders do every day. all you need to do is use a fixed risk amount. leverage doesnt matter either. just set a stop at your total risk amount or set an individual stop for each position that would total your total loss amount. lets take the nasdaq.
1 point 1 contract is 20 dollars. if your max risk on a trade is 400 dollars then here is the breakdown
1 lot=400 or 20 point stop
2 lot=200 or 10 point stop
3 lot= 133 each or 6 points
10 lot = 40 dollars each or 2 points
20 lot = 20 dollars each or 1 point
40 lot = 10 dollars each or 2 ticks
80 lot= 5 dollars each or 1 tick
mone of this inckudes avg 4 dollar round turn or slippage of 5 to 10 in amd 5 to 10 out so you could be paying 100 bucks just to get in on a 10 lot.
 
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
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REDP1800 said:
averaging down and up is what winning traders do every day. all you need to do is use a fixed risk amount. leverage doesnt matter either. just set a stop at your total risk amount or set an individual stop for each position that would total your total loss amount. lets take the nasdaq.
1 point 1 contract is 20 dollars. if your max risk on a trade is 400 dollars then here is the breakdown
1 lot=400 or 20 point stop
2 lot=200 or 10 point stop
3 lot= 133 each or 6 points
10 lot = 40 dollars each or 2 points
20 lot = 20 dollars each or 1 point
40 lot = 10 dollars each or 2 ticks
80 lot= 5 dollars each or 1 tick
mone of this inckudes avg 4 dollar round turn or slippage of 5 to 10 in amd 5 to 10 out so you could be paying 100 bucks just to get in on a 10 lot.
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This is a great strategy. (Sarcasm meter at full). In the immortal words of Tommy Lee Jones, "Try it."

 
I'm long in the YM at 27316, and the current price is currently 27116. So...Should I just go ahead and buy another one? Bring my average up on two contracts to 27216?

Or, should I buy 9 more contracts and bring my average long to whatever it would be...Um, long 10 contracts at an average of 27120?

Now my position is swinging for 50 bux per tick, and if it drops another 100 points from that average long, I'm in the hole for not down a simple $1500 on 1 contract, but down $5000 on 10.

And guess what! If it is at that exact level when the market closes that next day? I'd get a margin call, because -5000+(overnight margin of $60,000) = -$65,000!

Whoops! Yes, averaging down in futures is a GREAT idea without a 7 figure account.

With the NQ's higher margin requirements and swing ranges, do the math yourself! Or better yet, do it with live money! You will do just GR8, I am sure!
 
Overnight said:
I'm long in the YM at 27316, and the current price is currently 27116. So...Should I just go ahead and buy another one? Bring my average up on two contracts to 27216?

Or, should I buy 9 more contracts and bring my average long to whatever it would be...Um, long 10 contracts at an average of 27120?

Now my position is swinging for 50 bux per tick, and if it drops another 100 points from that average long, I'm in the hole for not down a simple $1500 on 1 contract, but down $5000 on 10.

And guess what! If it is at that exact level when the market closes that next day? I'd get a margin call, because -5000+(overnight margin of $60,000) = -$65,000!

Whoops! Yes, averaging down in futures is a GREAT idea without a 7 figure account.

With the NQ's higher margin requirements and swing ranges, do the math yourself! Or better yet, do it with live money! You will do just GR8, I am sure!
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Well ON if you are a trader that 1 contract should have been dumped ages ago. Why are you holding it?
 
volpri said:
Well ON if you are a trader that 1 contract should have been dumped ages ago. Why are you holding it?
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Ages ago? I've been in the trade for 48 hours now. What the hell is 48 hours to a swing trader?
 
Overnight said:
Ages ago? I've been in the trade for 48 hours now. What the hell is 48 hours to a swing trader?
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Oh, you must have missed all the other times I've held through pullbacks. Some went a few days, some went a week, some went a month. *shrugs*

(NQurious doesn't like my style on that bit, hehe.)
 
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