Why trading educators talk about entries 95% of the time?

[tradingismybusiness]

I have a couple issues with averaging down that I can't wrap my head around.

If I take a trade based on some signal and it goes the opposite way, then I expect
another couple pushes the opposite direction at the least, so why would I average into
what I believe is a failed pattern? Wouldn't I want to wait for a double failure or
for the opposite move to run its course if I dont want to flip direction?

Another problem I have with averaging is, I take a trade because I think its a good
location of where I want to be relative to the trading range or break out so why
would I go in with small size (expecting to average) on what I believe to be an
optimal entry point? That means your size of trade is growing as there is little left in
the move OR your size is growing on a failed premise.

because the strategy is easier by not thinking too much or being too exact if it goes in his favor it turns into a 1 lot quick scalp. if not its an adding to a loser that turns i to a quick scalp even if you are buying in a downtrend. again averaging down can be a quick death if you just clicked your last add and the mkt falls out from under you and then if we are talking lots like say 20 or 50 or 100 micro the slippage gets extremely expensive!! im not against anyway anyone trades but what if the mkt fell another 10 points..so
avg was 2895.5 on 4 lots it dropped to
2887.5, 10 more points would be 2877.5 or
20 points below avg. you are now down $ 3600 dollars
on a 1 lot entry at 2900 you are down 1,150

you must have a max loss or this system doesnt work and lots of money a stomach of steel and good instincts to pick bottoms n tops but if thats the case there are better ways to trade what u see

 

[Overnight]

... but there are much better and safer ways to do it but he doesnt realize this just yet

So you are poopooing his positive expectancy? Hrmmm!

Look man, I have relegated myself to the fact that whatever he is doing is working for him. I take his results on faith, because without proof, faith is all we gots.

 

[VEGASDESERT]

because the strategy is easier by not thinking too much or being too exact if it goes in his favor it turns into a 1 lot quick scalp. if not its an adding to a loser that turns i to a quick scalp even if you are buying in a downtrend. again averaging down can be a quick death if you just clicked your last add and the mkt falls out from under you and then if we are talking lots like say 20 or 50 or 100 micro the slippage gets extremely expensive!! im not against anyway anyone trades but what if the mkt fell another 10 points..so
avg was 2895.5 on 4 lots it dropped to
2887.5, 10 more points would be 2877.5 or
20 points below avg. you are now down $ 3600 dollars
on a 1 lot entry at 2900 you are down 1,150

you must have a max loss or this system doesnt work and lots of money a stomach of steel and good instincts to pick bottoms n tops but if thats the case there are better ways to trade what u see

Yeah, I mean thats nuts.

To me, the way to look at averaging is as an entire seperate trade, it just means that
the premise on your original trade is still ok and the second trade is simply a second
signal in the same direction. So let say you break about even on the 1st trade and
profit on the 2nd. But it doesnt matter if you ever took that 2nd trade, the 1st got
back to about break even or small loss or gain because the premise was still ok.

Over the long run, it doesnt matter the math is the same. Sure, you'll
have more "positive" days but your account at the end of the year will
be about the same. Because on that 2nd signal (the averaging down trade)
that will still fail at least 45% of the time. So its all the same.

The point is averaging should never be your oh shit I need to get out of trouble trade!

And it appears thats exactly whats happening. Because it looks like he's
averaging down fast without any 2nd reason to take a second trade. Its
just hoping imo. Even if you're secure in the larger trend it doesn't matter
there is no need to average to be positive for the day because it makes you
feel good, that 2nd fast trade has the same or worse probability of succeeding
because not enough price action happened to confirm a 2nd signal in the
same direction.

If you take a good logical positive expectancy trade and it goes against you and you add on,
that does not increase the probability of success, it just increases you odds
of not losing that day, but the odds overall dont change the get worse because
your always adding on to the shit trades and the ones that are good your
getting 1 for 1 on your money.

Its converted to gambling at this point.

 

[volpri]

you dont do overnight in futures because it is not as forgiving as intraday. once that overnight algo sees you adding it blasts you or you get caught up in a blast in the wrong direction overnight which can be substantial points on low volume. i wish you the very best and i hope it keeps working for you. but i caution anyone else trying this because you will need to stomach big losses on paper during your trade to exit with a smaller profit. here is an example mathematically. we will buy 4 contracts. every 3 points lower. we will exit with 1.5 points of profit watch the numbers
mkt at 2900 es
buy 1 2900
buy 1 2887 down 150
buy 1 2884 down 450
buy 1 2881 down 800
mkt drops to 2880 holds spikes lower to
2878.5 for a second then back up.
our average price was 2888
max draw down 1,900
mkt rallies hard off the bottom spiking back to where we almost got into the trade 2890 and we exited with 1.5 pts profit on 4 lots so
75x4 or 300 dollars profit and the mkt never went above our initial entry. we were right by being wrong! the problem if you have 3 of these and 1 wins and 2 lose here is the scenario
-1900 -1900 and plus 300! do that math!!

I won’t get into all these theoretical numbers even though they seem to be straight forward and mathematical, but I will just say that under the right conditions and the right scenario the probability figure of exiting an average down trade with a profit can be very high. That my friend makes the difference. There is a difference in averaging down to avoid a loss, regardless of the context. That is a sure loser route to go. But averaging down in the right circumstances, and for the right purpose, can be very profitable and render a high win rate. Probably on average half of my daily trades are of the averaging down variety and half are straight short or long scalps. Knowing when to do it and how to do it is certainly essential. And that can probably only be learned by a few years of market observation with a limited number of trading instruments.

The three variables are probability, risk, reward. They all three have to be considered in any trade straight or averaging down. In the above you are leaving out the probability factor and just considering the straight forward risk vs reward and what could or may happen, not what is likely to happen.


Let me ask you this; why will investors average down for long term? Because they know the probability, that over time, the stock or index will be up. Well for intraday PA it is the same... just the time frame changes. The context of long term cost averaging that makes it conducive is because of the context. Well same with short-term. Everything is just much faster. Would you plug in the same numbers above in investing without any input from the probability factor?

I have a friend who has some long term investments. When all the markets dropped because of this covid thing he called the managers of the fund. He was thinking of possibly changing some things. They recommended he leave it as was. Then it began to come back.

I don’t know for sure if he averaged down and bought more on the drop but if he did he is probably sitting ok.

Basically that is the basis that dozu888 has argued for. I rail jokingly on him a bit but he is absolutely correct and will be vindicated. We will soon see all time highs again. And he will be proclaiming himself again a master trader and the rest as idiots.

See the similar forces are at work intraday. The TF and holding time is just different. You could look at averaging down intraday as cost-averaging but intraday. Scaling in sounds more PC but it is nothing less than just plain old averaging down. If it looks like a duck and quacks like a duck then it is probably a duck.

Look at my charts and averaging down trades and see what I am talking about. I usually show the entire days trades on one chart at the end of the session so traders can see ALL the trades made for the day and see that they are not cherry picked trades. However, during the day I will show multiple charts as the trades are being taken and if I have time a small explanation as to why they were taken.

I think this will end my participation in this thread. I still maintain averaging down can viable and a good trading strategy if done correctly and at the right time in the right context. I win over and over. My charts show this. I have a high win rate and I break the rules.
Have a Great Holiday.

 

[volpri]

Yeah, I mean thats nuts.

To me, the way to look at averaging is as an entire seperate trade, it just means that
the premise on your original trade is still ok and the second trade is simply a second
signal in the same direction. So let say you break about even on the 1st trade and
profit on the 2nd. But it doesnt matter if you ever took that 2nd trade, the 1st got
back to about break even or small loss or gain because the premise was still ok.

Over the long run, it doesnt matter the math is the same. Sure, you'll
have more "positive" days but your account at the end of the year will
be about the same. Because on that 2nd signal (the averaging down trade)
that will still fail at least 45% of the time. So its all the same.

The point is averaging should never be your oh shit I need to get out of trouble trade!

And it appears thats exactly whats happening. Because it looks like he's
averaging down fast without any 2nd reason to take a second trade. Its
just hoping imo. Even if you're secure in the larger trend it doesn't matter
there is no need to average to be positive for the day because it makes you
feel good, that 2nd fast trade has the same or worse probability of succeeding
because not enough price action happened to confirm a 2nd signal in the
same direction.

If you take a good logical positive expectancy trade and it goes against you and you add on,
that does not increase the probability of success, it just increases you odds
of not losing that day, but the odds overall dont change the get worse because
your always adding on to the shit trades and the ones that are good your
getting 1 for 1 on your money.

Its converted to gambling at this point.

Yeah, I mean thats nuts.

To me, the way to look at averaging is as an entire seperate trade, it just means that
the premise on your original trade is still ok and the second trade is simply a second
signal in the same direction. So let say you break about even on the 1st trade and
profit on the 2nd. But it doesnt matter if you ever took that 2nd trade, the 1st got
back to about break even or small loss or gain because the premise was still ok.

Over the long run, it doesnt matter the math is the same. Sure, you'll
have more "positive" days but your account at the end of the year will
be about the same. Because on that 2nd signal (the averaging down trade)
that will still fail at least 45% of the time. So its all the same.

The point is averaging should never be your oh shit I need to get out of trouble trade!

And it appears thats exactly whats happening. Because it looks like he's
averaging down fast without any 2nd reason to take a second trade. Its
just hoping imo. Even if you're secure in the larger trend it doesn't matter
there is no need to average to be positive for the day because it makes you
feel good, that 2nd fast trade has the same or worse probability of succeeding
because not enough price action happened to confirm a 2nd signal in the
same direction.

If you take a good logical positive expectancy trade and it goes against you and you add on,
that does not increase the probability of success, it just increases you odds
of not losing that day, but the odds overall dont change the get worse because
your always adding on to the shit trades and the ones that are good your
getting 1 for 1 on your money.

Its converted to gambling at this point.

I will respond to this. I gotta stop.

Look the very reason I average down IS because I AM secure in the larger trend. So I am loading up at cheaper prices from my first entry. Since I am discretional maybe my first entry was a little early. More than likely the first entry I made was because I WANT IN ...any position ....simply because the setup was there. And the trade could immediately go in my direction not giving me the opportunity to average down at better prices. At least I would have a position on.

BTW your 45% figure is most certainly wrong if you are a good PA trader. Often the probabilty can be 80% that the averaged down trade will end profitable. Just look at my entries and exits on Some of my charts in my journal. How many of my averaged down trades were profitable? These triangle shape entries and exits on my chart are not placed there manually by myself but they are placed there by the platform as I took the trades. I will show them often on different time frames 5 min 15 min 30 min ....same trades. Do you really think I am going to take the time to figure where to place the same little Red and green triangles on the different TF So as to make it all line up with the other TF’s? Come on!

These thing said In my posts on this thread DO NOT TRADE THE WAY i do. YOU CAN LOSE ALL YOUR MONEY AND YOUR SHIRT IF YOU DON’T know what you are doing.

 

[volpri]

no you can do this with 2 or 3 lots he even shows he doing it 3 lots es. he isnt pushing the mkt around at all. quite the opposite he accepts the mkt pushing him around do long as it pushes back up to above his average but below his initial entry. thats the key. he isnt perfect but if he gets close he can eek out a small gain on all his contracts. thats all it is and you must know yourself to do it but there are much better and safer ways to do it but he doesnt realize this just yet

Better way? Spit it out. I am all for learning more. I shared my way. Lets hear the better way!

 

[tradingismybusiness]

what about your double up triple up after your max loss?
again what is the max loss per trade?
you like to dodge questions that are very important to one of the the things you stated number two i believe was risk and comparing 90 years of investing averaging down to day trading is like saying buying options no linger lose time value or that they never expire. thats the thing about day trading at 4pm it expires!
anyway. good luck averaging down and martingaling for profits

 

[tradingismybusiness]

Better way? Spit it out. I am all for learning more. I shared my way. Lets hear the better way!

the better way would be to exit your 1st trade then buy and if that doesnt work exit and buy 3 and if that doesnt work you exit and buy 4 that way you arent holding all those extra loss points. you are paying slippage and fees but those should be much less than holding but we could use our previous example to test it. i mean you could back test averaging down if you would tell us your max loss strat but then you added a double triple up.

 

[volpri]

I will say one more thing. The process works the same making an entry an then adding Another lit and averaging down a third contract for a total 3 lots as averaging down trading 10 lots each time time for 30 lots each. The limitations are account size and well maybe balls if steel. I mostly show smaller size and most of my trades are in the micro Because most traders have small accounts and they might can relate to the smaller size. I don’t have to do all this. It really is alot of work. I am not doing it to keep myself straight or accountable like many journals but to simply show how I trade. Maybe it will help a trader improve his SIM trading! ROFLMAO. It is entirely up to him what he actually does with it. I don’t recommend anything.

And here is the kicker...wait ....That is not all. Read the journal a second and third time and shipping is free. Hold on. Thats TOO is not all. You won’t pay 2000 dollars even though it is worth that. LOL YOU WON’t even pay 500 dollars. No sir you won’t pay 30 bucks. It is FREE yes free. As in NO CHARGE.

PS I have nothing to sell in case you didn’t pick up on that point.

If you don’t like my way you are certainly free to throw it in the digital and mental garbage can.

 

[tradingismybusiness]

there are ways to do it much better