What a stupid study

[taowave]

If he is a trader,as in swing,he doesnt make money if he is dead right.

He claims to use volatility to his advantage by scaling in when dead wrong.

Upside vol does nothing for him..

Look at his example and ignore the cherry picking..

Hes 28 delta long on his initial purchase???He basically doubles up plus some on each 12.5% correction from his initial purchase price.

Its the same way he views selling puts. Hes very consistent,but doesnt make money when he is right.

He acts like Elliot Wave is his edge as far as timing,but trades a 28 delta and doubles down to catch up??

makes ZERO sense from a trading perspective.

Hes an Investor,which is fine,but he is absolutely clueless when it comes to trading. If I made his claims,I would have the simulations and or P/L to back it up

I have no dog in this fight but after reading all of the posts, it is not an honest discussion or exchange of ideas.

You guys have your minds made up before you read the OP so you don't understand where OP is coming from. To me two points OP made merit your consideration:

1. OP mentioned he only traded index, no individual names.

2. He mentioned the importance of time.

On the first, individual names can go bankrupt but index's chance of going under is very low. The dow has been around for over a century, SPY has been around for years.

On the second, over time, for the last century, index always recovered from a drawdown.

To me the odds that OP's thesis might work is actually quite high.

Wall Streets and you equate volatility with risk. In real life volatility is not exactly equal to risk of ruin.

 

[deaddog]

1. OP mentioned he only traded index, no individual names.

2. He mentioned the importance of time.

On the first, individual names can go bankrupt but index's chance of going under is very low. The dow has been around for over a century, SPY has been around for years.

On the second, over time, for the last century, index always recovered from a drawdown.

To me the odds that OP's thesis might work is actually quite high.

The question should then be does the OP strategy outperform the index over time?

I doubt it for the following reasons.

The portfolio has to have a fair amout of cash available to be able to average down. That cash is an underperforming asset while market is going up or moving sideways.

At some point you take profit and OP hasn't mention an exit strategy to take profit.
When asked a while back the OP stated that at the time he had no position. I have to assume he would then be in cash.

In the case where you open a trade and it moves in your direction you now only have a small position and don't add to it.
In the case where you open a position and it drops you add and keep adding as it drops. You lower your cost per share but you don't know how long before you get back to breakeven. You capital is not making you any money.
Without looking at the whole portfolio over a period of time it's difficult to really assess what kind of returns are posible.
My guess is that a dollar cost averaging strategy will outperform the averaging down strategy over time.

 

[wxytrader]

If he is a trader,as in swing,he doesnt make money if he is dead right.

He claims to use volatility to his advantage by scaling in when dead wrong.

Upside vol does nothing for him..

Look at his example and ignore the cherry picking..

Hes 28 delta long on his initial purchase???He basically doubles up plus some on each 12.5% correction from his initial purchase price.

Its the same way he views selling puts. Hes very consistent,but doesnt make money when he is right.

He acts like Elliot Wave is his edge as far as timing,but trades a 28 delta and doubles down to catch up??

makes ZERO sense from a trading perspective.

Hes an Investor,which is fine,but he is absolutely clueless when it comes to trading. If I made his claims,I would have the simulations and or P/L to back it up

How can you guys be traders when you can't even read a chart? None of you has a clue when the bottom or top is in...I have proven that time and time again. It doesn't matter what option strategies you use...you are chasing your tails. Averaging down is the only way to trade smart...it's the only way that will consistently beat the market. I am loading up during the ABC corrections like clockwork while you guys are drawing meaningless support lines lol. I road mapped Bitcoin since last summer...no you guys aren't traders. .you are clueless gamblers hiding their inability in futile options strategies.

Holidays are great.

Btw the example I gave was a worst case scenario to prove a point about averaging down.

 

[taowave]

If you truly believed in your analysis you wouldn't be long 28 deltas,scaling in down 25% to have full notional

Just slap on a risk reversal and call it a day..

You are welcome

How can you guys be traders when you can't even read a chart? None of you has a clue when the bottom or top is in...I have proven that time and time again. It doesn't matter what option strategies you use...you are chasing your tails. Averaging down is the only way to trade smart...it's the only way that will consistently beat the market. I am loading up during the ABC corrections like clockwork while you guys are drawing meaningless support lines lol. I road mapped Bitcoin since last summer...no you guys aren't traders. .you are clueless gamblers hiding their inability in futile options strategies.

Holidays are great.

Btw the example I gave was a worst case scenario to prove a point about averaging down.

 

[wxytrader]

If you truly believed in your analysis you wouldn't be long 28 deltas,scaling in down 25% to have full notional

Just slap on a risk reversal and call it a day..

You are welcome

There you go again. It was a chart showing you that even if you timed the market completely wrong you still come out way ahead. Obviously I wouldn't begin my entry at those levels ..just like I wouldn't be legging in right now. BUT if I did and the market capitulated I would be fine.

 

[mikeriley]

George: Hey Bob, you are not a trader because you can't determine the top or bottom of a Market!

Bob: My risk is based upon time and not price levels.

George: It's my way, or no way!

 

[Slow Learning Elf]

Simple solution is to Backtest and watch out for survivorship bias.

Backtesting for things like take-profit and stop-loss is very tricky and prone to overfitting. There are ways to overcome that (e.g. backtesting on simulated data with characteristics similar to the real world), but generally it will not hold OOS.

 

[danielc1]

I´m a car nut. I like nice cars. I spend a lot of time with people that also like very nice cars. One of those friends has given me a comment once I never forget: Most people buy it for status. There is no difference between the "poor people" and the "people with status". If look at it from a true wealthy point of view, they are comparable broke. Just on a different level of broke. Most people driving those cars is because credit is widely available and that most brands give extended warranty on their vehicle's. There are more wealthy people driving a Toyota that could afford a luxury brand of car then that their are people driving luxury cars that could afford to own a Toyota. That is how crazy this economy is a this moment. It is all borrowed. And if people like OP are stating that average down is a good idea, it is really time for a scenario like the 1930, or the end of 1989's in Japan. Every where you look, you see scenarios where the only way is up. More power to you, if you can make it work like this. History will repeat.

 

[wxytrader]

I´m a car nut. I like nice cars. I spend a lot of time with people that also like very nice cars. One of those friends has given me a comment once I never forget: Most people buy it for status. There is no difference between the "poor people" and the "people with status". If look at it from a true wealthy point of view, they are comparable broke. Just on a different level of broke. Most people driving those cars is because credit is widely available and that most brands give extended warranty on their vehicle's. There are more wealthy people driving a Toyota that could afford a luxury brand of car then that their are people driving luxury cars that could afford to own a Toyota. That is how crazy this economy is a this moment. It is all borrowed. And if people like OP are stating that average down is a good idea, it is really time for a scenario like the 1930, or the end of 1989's in Japan. Every where you look, you see scenarios where the only way is up. More power to you, if you can make it work like this. History will repeat.

First of all I'm the first to say I'm not a car guy . I'm just a guy with cars. Secondly I buy cars. I don't finance cars, Thirdly, averaging down only works in a downtrend. I'm welcoming this impending downtrend. I hope we capitulate and I catch a falling knife the whole way down.

 

[danielc1]

First of all I'm the first to say I'm not a car guy . I'm just a guy with cars. Secondly I buy cars. I don't finance cars, Thirdly, averaging down only works in a downtrend. I'm welcoming this impending downtrend. I hope we capitulate and I catch a falling knife the whole way down.

You are mistaken the part where your strategy works and where it doesn't. It is not because you are averaging down or catch the falling knife, where you make your money, it is in the part of the recovery you make it. And there are two if. One, will it recover so you will make the money and second in what time frame. It is not because history has shown that the SPY recover sooner then later, you in your lifetime will not have the period of decades of no recovery. I would not bet on 'hope' of recovery, even though it has shown in the last 25 years it does. But it took also a decade from 2000 to 2013 to see new highs after some dips in those years. All depends on your cycle of life. You can do great and you can turn 70, just before a period of no recovery for decades. That is why most would prefer a defined system with clear risk control and a skew in risk to reward ratio's.