I certainly have in the past more than id like to admit. 
Who will admit they got slaughtered averaging down today?
- Thread starter VEGASDESERT
- Start date
I certainly have in the past more than id like to admit.
I learned last year to not average-down in a rising-rate environment. I got one small position that is down 1200 bux or so with June expiry on the MES. Powell fooled us all with his Economic Forum talk in mid February about dis-inflation, and then backtracked during his Congress testimony. The guy is a scourge.
having some fun tonight...
lol
15 minute chart
lol
15 minute chart
in defense when bracket trading with high probabilities adding on accomplishes the following:
- facilitates the speediness of the position round turn by entering at better prices because your profit target becomes closer with every better entry making the "in the market time" less.
- by bringing your profit target closer you are taking advantage of inherent market volatility to exit profitably faster.
- also you are moving your stop loss further out automatically as you add on, making market volatility less likely to stop you out.
On this bullet point I disagree. You are actually moving your stop loss closer to your position, because as you get deeper and deeper into the hole, trying to DCA your position, you are leaving less and less wiggle-room for the volatility of the position.
I suppose this really only matters for leveraged positions like futures, but can be shown to be true for outright stocks as well on margin. The point being is that there is a certain point where most traders will be averaged so deep into a loss that they will reach an equity breaking point hoping for a rebound which never comes.
At least with most stocks, especially dividend-paying ones, you are probably safe if you hold it long enough. And in this environment, that could take years. But it is not a loss DCAing a stock until you sell at a loss! DCA into AAPL all you want, it ain't going anywhere. Nor CAT or DEER or MCD or those other behemoths.
Hope spring eternal. Hope is not a strategy.
It is better to run a larger stop, and when you hit a virtual, lesser, stop get out on the FIRST retrace. No exceptions. Alternatively run a slighter smaller stop and just take it the stop. Of course a better strategy is to get a better entry or not take the trade at all.
Also when you spend too much time in a negative trade you are wasting good trading time.
You usually have to make the mistake with real money too to make it BURN, before you learn your lesson.
And yes, I did, but minimal damage because it was contained.
Not for the faint of heart. Not for me.
I'm going by memory that could be faulty, but a few years back, @volpri averaged down a long position in ES during a 40 (or maybe it was a 60) point drop and pulled it off. I was like... damn!