Well, you can average down anything, yes…but I really believe that most of these threads (and debates/arguments) prop up purely due to recency bias…theres another thread about the silicon valley bank and selling options…almost comical really…risk profile is similar to selling naked puts/calls of course, but averaging on majority of noise ranges works until it doesn’t. and again I’d never attempt on something like crude oil as a for instance
Who will admit they got slaughtered averaging down today?
- Thread starter VEGASDESERT
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Well, you can average down anything, yes…but I really believe that most of these threads (and debates/arguments) prop up purely due to recency bias…theres another thread about the silicon valley bank and selling options…almost comical really…risk profile is similar to selling naked puts/calls of course, but averaging on majority of noise ranges works until it doesn’t. and again I’d never attempt on something like crude oil as a for instance
There was a kinda'-way to do it with multiple months in CL, and that is what inspired my journal. Alas, I regret leaving that method and instrument to go to equities. I suppose it was for the best, because based on my own personality and trading style at the time, the April 2020 negative CL fiasco would have wrecked me.
I respect that…I’m still trying to establish a baseline for scaling vs averaging down in most of these threads…there is a dogmatic aversion to contemplating something different
Averaging down should be considered only as a last resort to getting your ass out at breakeven. You're only looking for a quick bounce and not a full-fledged reversal. It should NEVER be considered as a bargain for you to make twice your money. Needless to say, you're already in a deep hole. That's not gonna change by doubling down.
it depends on your thesis and the basis for it. If your thesis is mean reverting averaging down can be very profitable.
If your thesis is momentum driven scaling up can be very profitable.
I think the dogmatic guys don’t understand the nature of their thesis and then get confused.
Why work so hard? Looking for setups everyday, cutting losses and psychological issues after a string of losses. There are much better ways. You say you made $2000 something yesterday? I can make 20k a month without all this hard work and drama by structuring the same view with options. What’s more, I can employ all my capital in one trade and earn a return on all of it. I don’t need to worry about putting too much capital and losing it all. If I find a near arb, which I frequently do, I can even borrow more and earn an easy return on other peoples money. Anyway, to each his own. I just don’t want to work so hard at trading, defeats the purpose of trading in the first place. Options modeling is like painting a picture, an art form. I love every moment of it.
I certainly have in the past more than id like to admit.
Never average down is about the only trading rule I'm able to follow without fail.
One could easily lose a ton of money on such a day without averaging down, though.
Intriguing comment. However, saying you make 20K a month is a meaningless number without mentioning on how much capital and at what risk profile.
Thank you.
I was just comparing the amount of work it takes to make the similar amount of money. You definitely need deep pockets, portfolio margin and options knowledge to trade that way. You have to especially lose this stop loss trading mentality. It’s a complete paradigm shift. Again, the point of my post was why work so hard to identify and execute so many trades when you can simply do one trade a month or so and employ all your capital. And no, I am not selling puts or even iron condors.
because sharpe improves if you trade different securities well