..... period.
What a stupid study
- Thread starter wxytrader
- Start date
..... period.
Of course it's a measured approach to a maximum risk. The point is you never close for a loss. The worst case scenario is time, which will be compensated by cost ..and with a stock it's bk of course but you have allowed for that potential. It's not a mechanical system. Also you should never be buying in an uptrend...only a downtrend.
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You still didnt answer if its a single name or not...
Never buy in an uptrend? How do you define the trend?
And you are close to trolling,and you know it
Never buy in an uptrend? How do you define the trend?
And you are close to trolling,and you know it
First, the discussion is re trading -- not buy / hold long-term people whom basically don't even watch daily, nor monthly prices.
But even the blind buy-hold strategy, worked in the U.S. market, for past several decades, and even then the profits are largely due to Central Bank money printing.
The same average down, no stop-loss strategy, employed in hundreds of markets, world-wide, over many decades, did not work. Remember, there were countries where currencies were replaced; where stock markets were closed; where countries disappeared.
All knowledge is contextual, so if the thread assumes in U.S., in large-cap listed stocks, for the past few decades, then still, that does not fully apply, as there have been many stocks that have --and still do -- declare bankruptcy. Averaging down those hundreds of stocks -- especially without a stop-loss -- was / is financial suicide.
So if the proponents of this theory assume they only trade "successful" companies, and live in period where the Fed balance sheet has been pumped to over $ 7 trillion, then yes, always average down, and never use a stop-loss.
I managed money in futures markets using back-tested, proprietary, computerized trading, in late 1990s, and told my clients I had FIVE separate, 100% highly profitable, with minimal draw-down trading systems.
One system bought S&P futures Monday morning; the next bought Tuesday morning ...you can see where this is going.
The fact that those 5 systems worked for long periods, does not alter the fact that they were incorrect approach to trading.
P/L is not the way one should just a trader, nor a trading methodology.
Like lottery winners, one does not learn from following their methodology of picking winners.
Trolling because probably 98% of traders would disagree with me, but apparently only 2% of traders make money...and this method has landed me a Lambo, and a Lotus.
Single stock carries bk risk. I prefer this method with ETFs or crypto ETFs. For single stocks I might choose 5 and average down until 20% of portfolio in each.
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Over long periods about 80 - 90 % of traders lose money, and country to what you imply, they generally do NOT use stop-loss orders / methodology.
In addition to having managed money in past, I also owned a small futures firm, and saw just how people used every excuse not to use any type of stop-loss.Generally their stop-loss was handled by the broker, via margin calls.
But long-term successful traders: they do not recommend averaging down (except perhaps within tiny windows,) and especially always employ some type of stop-loss.
Well if you are getting margin called then you aren't managing risk. The whole point to this method is you don't stop out and you don't get pushed out. You sell on your terms even if those terms are the company goes bk. If the worst case scenario is factored into your trading then you are in control not the market.
When I'm deep into a position I probably check the stock price as often as I check the market value of my home...and react with the same urgency.
Since this is s trading forum, you should specify when you are referring to investing, like you do most of the time.
Context is a very important part when communicating.
