look. this site us full of losers who cannot blame their terrible ability to trade and profit. my best trades are always from averaging into them. it works for me so i dont give a fuck what you think. i dont trade micros and i dont trade 1 lots that is why you are losing consistently. you have no clue. omg.im in a micro ym. im down 200 dollars in 48 hours..lmfao.
Tell me why averaging down is a bad idea .
- Thread starter joker542
- Start date
Then what are you talking about when you speak of averaging in, or down? Or whatever you wish to call it? At which point does one average down, as opposed to just cutting the loss?
You seem conflicted on the idea.
You shoulda' done this, you shoulda' done that...Swing traders like me, who stomach such swings, do not think that way. That is why we do not average down.
Sure it will fail sometimes but a trader has to have things in place to mitigate the loss. You have to have your stoploss in place big enough that will keep you in the trade but also take you out if price gets to the stoploss and to do so within your risk levels. If a trader cannot do this then sure it would be better to not average down. You got to be mechanical about it.
I can tell you this without even looking at the chart there were multiples opportunities during that 200 point drop in your trade to enter long ..average down...and exit with a profit probably several times instead of holding a 1000 loss on 1 contract. But everyone does whatever “floats their boat” i guess.
One averages down or not depending on the context. And even if the context appears to be conducive to the tactic SL’s still have to be used.
Says someone who sounds like an arrogant 17-year old who's never traded anything but a demo account. Let's see some hard evidence of your trading results...else you're just another poser.
As long as your risk management is decent it's OK. Met a well-known hedge fund manager who wrote combos against his short stock ideas. The stock went higher you shorted more - stock hit your downside target the option covered your short. Lot's of devils in the details of risk management, but it was the first time I had ever seen it. His view was if the stock never really sold off as you hoped - you kept both sides. If your view on the stock changed - you closed everything.
Traders need to learn to cut their loses every time with no hesitation. Price action is telling you something, it's a good idea to observe what it is telling you instead of betting against it. Loss aversion & gamblers fallacy go hand in hand with averaging down. Novices ny human nature tend to average down, they have not yet gotten beyond loss aversion & gamblers fallacy. .
I always have my smallest size on until a position shows a profit, adding on size only if price action supports it. With averaging down you have your largest size on when wrong & have invested more mental equity, & cash making it that much harder to take the larger loss.
The pool of legendary traders that came out of Commodity Corp were taught:
Jesse Livermore put it like this:
“Continue with trades that show you a profit, end trades that show a loss”
You’ll probably end up with more than one active trade at most of the times. In those cases it is important to remember to stay with your winners.
For most traders it is too difficult to take a loss. First they take their profit on a winning trade. And hold on to the losing trades.
Hoping that those losing stocks will turn around and change in a profit.
Off course hope is not a strategy for the stock market.
And hoping that a losing stock is going to turn around is just foolish. Don’t try to fight the market.
I always have my smallest size on until a position shows a profit, adding on size only if price action supports it. With averaging down you have your largest size on when wrong & have invested more mental equity, & cash making it that much harder to take the larger loss.
The pool of legendary traders that came out of Commodity Corp were taught:
- Don’t try to make an average from losers.
- Never keep trades that show a loss and sell those that show a profit. Get out with the least loss and sit tight for greater profits.
Jesse Livermore put it like this:
“Continue with trades that show you a profit, end trades that show a loss”
You’ll probably end up with more than one active trade at most of the times. In those cases it is important to remember to stay with your winners.
For most traders it is too difficult to take a loss. First they take their profit on a winning trade. And hold on to the losing trades.
Hoping that those losing stocks will turn around and change in a profit.
Off course hope is not a strategy for the stock market.
And hoping that a losing stock is going to turn around is just foolish. Don’t try to fight the market.
Last edited: