Must be their modus operandi. I been scalping since the 1990’s off and on when my career responsibilities afforded me the time..etc. To me it is actually easier today than then. We had no emini’s back then. As long as markets go sideways...up and down..I can scalp them. When they quit doing that then it is over.
Tell me why averaging down is a bad idea .
- Thread starter joker542
- Start date
Thanks for the video.
Question about Sierra Chart: did you have to code this automated strategy yourself or is there some inbuilt functionality that allowed you to create this auto strategy without cutting code, eg is this perhaps using the inbuilt Spreadsheet capability?
I use SC fairly intensively, but only as a discretionary trader so I have never looked at cutting code, using the Spreadsheet capabilities or anything to do with automated trading/strategies.
Cheers for any insight you can offer.
Averaging down is a bad idea because the market can remain irrational longer than you can stay solvent.
On my long term holds, I actually average down all the time and quit putting stops on them. It worked well. The logic: I buy keepers when they are on sale, if they go down further, they are even better bargains. Some examples: GOOGL, MSFT, BRK-B... I can remain irrational longer than Wall Streets can, especially when there is blood in the Streets.
I tried it with short term trades. Did not do that well: GE, TEVA...
My lessons learned: Don't average down in short term trades.
Private Messaged you
On my long term holds, I actually average down all the time and quit putting stops on them. It worked well. The logic: I buy keepers when they are on sale, if they go down further, they are even better bargains. Some examples: GOOGL, MSFT, BRK-B... I can remain irrational longer than Wall Streets can, especially when there is blood in the Streets.
I tried it with short term trades. Did not do that well: GE, TEVA...
My lessons learned: Don't average down in short term trades.
/\ Exactly this.
I posted something similar in the past.
"I'm 58 years old now and do scalping of CL and ES to keep interested and make some money.
When I was younger and would recommend this for younger members I would identify 20 companies that I thought were great, safe dividend payers. Divide my money into 20 portions. I would then split that in half-so 40 portions.
When an identified stock fell 20% off a high water mark, buy it with 1 of the 40 portions. If it dropped another 20% buy with the other portion. If it didn't drop the 40% total, buy it again on some future 20% dip. Collect the dividends and NEVER sell.
Slow and steady wins the race and builds real wealth.
Good luck to all"
But this is a trading forum, you should at least tell us if you average down in your short term trade?
Nope, never.
Very easy and safe to do with long options. BUT only if you have systematically tested and use LOW leverage! Let's say for example your careful and reasonably realistic back and forward testing shows a much better win rate and profit factor if you average in 3 times with a 1 to 3 week hold, or profit stop. Sure, you could easily lose most/all of the option value, but it will be a small fraction of the loss from long stock. Wouldn't do it with futures or stock. Not worth the risk.
have u ever thought about what you just wrote and why this happens? do you really think it is because all of your studying planning and experience were just wrong? nope. ur being gamed constantly and not just you but the entire lot of retail