Price is in an uptrend. I would wait for a retracement and try to take a long position when the uptrend resumes. Please correct me if I'm wrong.
Tell me why averaging down is a bad idea .
- Thread starter joker542
- Start date
Thanks for sharing. I will wait and see if anyone else would like to participate.
Hilarious
Tell me why averaging down is a bad idea .
-When the trend is REALLY going down and is not reversing until a very very very long time later or never reversing. Averaging down is just throwing good money after bad and you end up with losses so huge that you can never make back.
This is why I never roll options.
-When the trend is REALLY going down and is not reversing until a very very very long time later or never reversing. Averaging down is just throwing good money after bad and you end up with losses so huge that you can never make back.
This is why I never roll options.
WHEN.
Key key word there. I don’t average down just to be averaging down or to try and salvage a loss. There has to be a logical reason for doing it. Things such a context ..larger..and more immediate ...need to support the action of averaging down.
There are times even in a trend that I will do it. In what is called Small Pullback (bear or Bull Trends) Trends. These are relentless trends that just grind up in a bullish trend most of the day or grind down most of the day in bear trends. Nearly every PB is an opportunity to average in. Alot times though it isn’t much of averaging down because not much of a loss to average into but is really more like scaling in but some trades will be adding to a losing position in SPB TRENDS. Here is an example. Adding over every PB is a good strategy because this is a relentless trend that for the most part is staying above the EMA. ON THE BIGGER PB’s I will be adding to losing positions because as the PB is happening I am adding and adding. On the smaller PB’s I am scaling in and not really adding to much of a losing position because the swing lows are successively higher. But in either case shallow or deeper PB’s in the PB itself I am adding to a losing position ( which is the first entry in the PB) within the PB. Losing position in relationship to the first PB entry itself. Scaling in though in relationship to the entire trend. This isn’t the best chart for showing the concept as it occurs intraday but it is good enough to describe the process. I don’t know what time frame the chart is.
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From a scalpers viewpoint trading on a 5 minute chart with possible strategies and tactics to employ ...well...this morning is an excellent lesson to learn about when to NOT average down and if I had already averaged down by some mistake then it is time to dump, reverse, and double up in the new direction. From an investors viewpoint this slide is nothing. He would be adding and adding. Buying cheaper. But for a scalper on a 5 minute chart this morning is a killer to hold onto. All signs point to a slide down, an impending reversal. It may well trade right back up. Then down again and the session end up being a broad Trading Range day but a scalper cannot and should not hold onto any averaged in position or think about averaging in until things settle down. If I had averaged in I got to just exit...and attempt to get back the loss by waiting for more opportunities to scalp a broad range the rest of the day (if it turns into that) or a further slide south (if it turns into that).
Signs of a Big Range day. Price races down. Then races up. About the time one thinks it is a bear market we get a boom to the upside. Then bam ..a race back down. Traders are confused.
At this point it is still not obvious as to what kind of day this will be but the more immediate context ...this urgent slide down ....suggests taking trade setups on the short side is probably the best thing to do. We may form a range on the push back up then a BO of the range in either direction. Or it could be just a big range day. Or ranges within ranges. There are many ways to trade this type of action and whatever it ends up being, but the big lesson here is; when to NOT average down and when to GET OUT immediately if one HAS already averaged down.
Action around the 2 MA’s come into play here. The immediate 20 EMA and the intermediate trend 50 SMA. PRICE IS UNDER both and in an urgent move. Time to dump an averaged down position and certainly not contemplate entering one.
On a 15 min, 30 min, or 60 minute TF this action right now as I post this is simply a Climatic spike BO PB move and is in the PB right now as I type. However on all TF’s up to 1 hour TF price has gone below THE 50 SMA.
I added the volume bars to highlight the exhaustion bar action.
Signs of a Big Range day. Price races down. Then races up. About the time one thinks it is a bear market we get a boom to the upside. Then bam ..a race back down. Traders are confused.
At this point it is still not obvious as to what kind of day this will be but the more immediate context ...this urgent slide down ....suggests taking trade setups on the short side is probably the best thing to do. We may form a range on the push back up then a BO of the range in either direction. Or it could be just a big range day. Or ranges within ranges. There are many ways to trade this type of action and whatever it ends up being, but the big lesson here is; when to NOT average down and when to GET OUT immediately if one HAS already averaged down.
Action around the 2 MA’s come into play here. The immediate 20 EMA and the intermediate trend 50 SMA. PRICE IS UNDER both and in an urgent move. Time to dump an averaged down position and certainly not contemplate entering one.
On a 15 min, 30 min, or 60 minute TF this action right now as I post this is simply a Climatic spike BO PB move and is in the PB right now as I type. However on all TF’s up to 1 hour TF price has gone below THE 50 SMA.
I added the volume bars to highlight the exhaustion bar action.
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Time to wake up! might be buying time fer you?