What a stupid study

[mikeriley]

You can average down all day long on the SPY DiA IWM and QQQ and literally print free money and make free money consistently These major indexes even if they were to collapse 30 40 even 68% will always always always come back so cost averaging into these index etfs is actually a brilliant thing to do.

Oh good grief, who could survive if a market goes down 68%, REALLY?
Capital requirements would be too much to bear. (excuse the pun)

IF said trader is following any decent market analysis he or she would
have been out before the collapse. This perma bull mentality is
definitely only fit for investors.

 

[taowave]

Your initial entry was 75 shares..You scaled into 268 total..whats 75/268...
Its not much different than you approach to selling Puts..Very consistent...

You finally said it Buy and Hold is the most effective method,and I 100% agree. Most traders would be far better off getting a job and either DCA/ VCA or some hybrid approach.
But that is not trading,its investing,and it has ZERO to do with employing stops.

Where you are a 100 percent fail,is your methodolgy clearly illustrates that you, like 99% of the people in the world, are incapable of picking bottoms. Elliot,Gann,Fractals is one form of voodoo,much like discount to intrinsic based off DCF is the Fundamentals preferred method.

Since you kindly illustrated that you can not identify a bottom,you start out with small fraction of you intended allocation. In the example you gave,it was 28%.Thats really small,and proof that you suck as much as everyone else at picking bottoms.So what do you do? You essentially double up 2x as the market craters.You are fully invested down 15 percent.

FWIW,its exactly how you trade options. In the trade you posted a short time ago,you sold 1 ATM put on an 18 dollar stock.Stock cratered,down apx 30 percent,and the option tripled in price. I believe you sold another put,stock rallied and you collected the premium.

Is that an effective way of trading??maybe,but you better stay really small.
Is that the only way to trade?? Absolutely not,and again that is where you FAIL.

Your approach is to have a high win rate and not take losses. Works for you..

My desk covered Paul Tudor Jones way back when. Like you,he was a Waver. Unlike you,he "swung for the fences",but was fast as %^$& at taking losses and resetting. We discussed selling options as a directional play,and he looked at us like we had 3 heads. He was only interested in getting paid when he was right. And he had NO problem being wrong small 9 times and then smashing it on the 10th try. Not that much different than what William Eckhardt talks about in Market wizards.

Again,I am not saying your method doesnt work,but its alot closer to longer term Investing than it is trading..Nothing wrong with that

Why are you stuck on this 28 delta? Who even talks delta when referring to stocks lol. That was a worst case scenario entry. There was a study done picking worst possible entries since the great depression and it proved that buy and hold was the most effective method. Averaging down would perform even better.

That worst case scenario is un realistic because you have as much chance at buying at the top as you do the bottom. Also, none of you has ever picked the bottom in your lives. If you had any confidence that you could recognize the bottom you wouldn't be so dependent on stop losses to manage your incompetence.

Also there is no right or wrong, just less accumulation or more accumulation.

 

[wxytrader]

Your initial entry was 75 shares..You scaled into 268 total..whats 75/268...
Its not much different than you approach to selling Puts..Very consistent...

You finally said it Buy and Hold is the most effective method,and I 100% agree. Most traders would be far better off getting a job and either DCA/ VCA or some hybrid approach.
But that is not trading,its investing,and it has ZERO to do with employing stops.

Where you are a 100 percent fail,is your methodolgy clearly illustrates that you, like 99% of the people in the world, are incapable of picking bottoms. Elliot,Gann,Fractals is one form of voodoo,much like discount to intrinsic based off DCF is the Fundamentals preferred method.

Since you kindly illustrated that you can not identify a bottom,you start out with small fraction of you intended allocation. In the example you gave,it was 28%.Thats really small,and proof that you suck as much as everyone else at picking bottoms.So what do you do? You essentially double up 2x as the market craters.You are fully invested down 15 percent.

FWIW,its exactly how you trade options. In the trade you posted a short time ago,you sold 1 ATM put on an 18 dollar stock.Stock cratered,down apx 30 percent,and the option tripled in price. I believe you sold another put,stock rallied and you collected the premium.

Is that an effective way of trading??maybe,but you better stay really small.
Is that the only way to trade?? Absolutely not,and again that is where you FAIL.

Your approach is to have a high win rate and not take losses. Works for you..

My desk covered Paul Tudor Jones way back when. Like you,he was a Waver. Unlike you,he "swung for the fences",but was fast as %^$& at taking losses and resetting. We discussed selling options as a directional play,and he looked at us like we had 3 heads. He was only interested in getting paid when he was right. And he had NO problem being wrong small 9 times and then smashing it on the 10th try. Not that much different than what William Eckhardt talks about in Market wizards.

Again,I am not saying your method doesnt work,but its alot closer to longer term Investing than it is trading..Nothing wrong with that

How many times do I have to point out that the example I posted wasn't a trade, it was showing the outcome of averaging down if you entered at the worst possible time. I'm a bottom dweller always have been and if I'm loading up the bottom is in.

Now the short put I sold I knew price was going to drop but I wanted the premium. I don't care what the stock does as long as I get the premium. If it didn't recover like it did then I probably would have doubled dipped and keep selling call premium. It's only one of multiple premium trades anyway.

 

[taowave]

If you are young and dont need the cash to live,I concur

I think everyone is in agreement with that...

And it has taken as long as 10 years to go from peak >trough > peak...

Regardless,I have to commend WX for sucking me into yet another thread with a catchy

title,and ultimately agree with him on Cost Averaging the Indicies..

When will I learn?







[/QUOTE]

You can average down all day long on the SPY DiA IWM and QQQ and literally print free money and make free money consistently These major indexes even if they were to collapse 30 40 even 68% will always always always come back so cost averaging into these index etfs is actually a brilliant thing to do.

 

[deaddog]

I just want to elaborate that I am wrong all the time in the sense that I am early...however that is by design as there is no way to determine if it will be a single or a double correction. All it means is I am legging in longer and accumulating more.

I am wondering if you are accumulating more or getting the best price.
I don't care where you enter but lets say you get a chance to average down 3 or 4 times.
I'll enter the same time as you with a full position.
I'll take a stop 1/2 the distance between your average down entries.
If you enter at 20 and average down at 18, I'll stop out at 19 and re-enter with a fill position at 18.
When the market finally turns I'll have a full position at the lowest entry and you will have to wait to get back to breakeven, to make any money. Not only that but we'll both have aproximately the same number of shares.
If the market heads north right away, I'll have a full position and you will only have a partial position. You might want to pull up a spreadsheet and take a look.

 

[wxytrader]

I am wondering if you are accumulating more or getting the best price.
I don't care where you enter but lets say you get a chance to average down 3 or 4 times.
I'll enter the same time as you with a full position.
I'll take a stop 1/2 the distance between your average down entries.
If you enter at 20 and average down at 18, I'll stop out at 19 and re-enter with a fill position at 18.
When the market finally turns I'll have a full position at the lowest entry and you will have to wait to get back to breakeven, to make any money. Not only that but we'll both have aproximately the same number of shares.
If the market heads north right away, I'll have a full position and you will only have a partial position. You might want to pull up a spreadsheet and take a look.

Well first of all you'd have to be willing to buy during a downtrend or during a capitulation. Secondly, you'd have to be nailing the bottom because if you get stopped out continuously on the way down to the bottom that's going to equate to losses adding up and your cost basis increasing.

 

[SunTrader]

The stop loss didn't stop a loss, it guaranteed a loss. As mentioned there is no right or wrong as you see it in terms of ego. If you are right you accumulate less shares, if you are wrong you accumulate more.

The stop loss guarantees the loss not getting bigger. Plain and simple. I've have absolutely no trouble taking a small loss.

It also allows you to get back in sooner, or hey even go short. What a concept.

Doubling down does nothing but guaranteeing more uncertainty with the decision to go long.

Sometimes you are right, sometimes you are terribly wrong.

You for some really strange reason prefer this.

So do the 90+%, until they learn or lose it all.

 

[wxytrader]

The stop loss guarantees the loss not getting bigger. Plain and simple. I've have absolutely no trouble taking a small loss.

It also allows you to get back in sooner, or hey even go short. What a concept.

Doubling down does nothing but guaranteeing more uncertainty with the decision to go long.

Sometimes you are right, sometimes you are terribly wrong.

You for some really strange reason prefer this.

So do the 90+%, until they learn or lose it all.

If you are going long and find out 10 minutes later that the trade is short long term your TA is suspect. Yeah you could short the different legs of the correction but it's not worth trouble. Just load up and blast off.

 

[deaddog]

Well first of all you'd have to be willing to buy during a downtrend or during a capitulation. Secondly, you'd have to be nailing the bottom because if you get stopped out continuously on the way down to the bottom that's going to equate to losses adding up and your cost basis increasing.

If you keep getting stopped out on the way down and buying in at a lower price you are better off than averaging down.

 

[wxytrader]

If you keep getting stopped out on the way down and buying in at a lower price you are better off than averaging down.

Not likely, and how many times are you getting stopped out? You are assuming you are getting the bottom or near to it. You could get stopped out multiple times at the same level. Also, the last stop out might recover before you get back in. You guys claim to be loss averse, but your solution is to over trade and rack up way more getting stopped out and fees.

Also, what the heck is your precious stop doing after hours and on weekends? That's why this is a moot point. If you aren't day trading then your stops are useless anyway. If you are day trading then you aren't going to benefit either way...you're just paying for the brokers vacation.