Why you should average up, NEVER down
- Thread starter garfangle
- Start date
Buy into strength. Sell into weakness.
I generally agree with this for the simple fact that averaging up is going with the trend while averaging down is going against the trend. The only valid method of averaging down IMO is scaling into small pullbacks of a strong trend, but a very clear and objective stop loss method should be followed when doing this. This method is also more about scaling in due to large size vs averaging down.
Quote from CaptainObvious:
Tell that to the people that bought F at 2 bucks. It all depends on whether you're building a longer term position through accumulation, or you're trading the move. If you're trading the move, then averaging up is "usually" a better play. If you're buiding a long term position then averaging down "can be" a money maker. If you don't know why you're taking a position in the first place, you're going to get your head handed to you regardless of what you do. There are no absolutes! Learned that lesson about 10 years ago. Cost me about 60K. Education, it is expensive.
A trader needs many tools in their tool box. A hammer is great for pounding nails. Not so useful for painting a wall. Once you have a few tools, know what the tools are for and their limitations, then you can decide...do I want to pound a nail today, or do I want to paint a wall? Grab the right tool and get to work. Even then, some nails will bend and some paint will streak. Enough metaphors
what about those that bought GM all the way down bc it would never go bankrupt?
I never average down.
I always add to positions once they are winning.... you can add as much as you want decrease the size or increase whatever your strategy tell you to do.
Usually a good position is right almost straight away.. the ones which takes time to move in positive territory tend not to perform well.
I am a trend follower.. I have around 42% hit ratio and I am happy with it.
I always add to positions once they are winning.... you can add as much as you want decrease the size or increase whatever your strategy tell you to do.
Usually a good position is right almost straight away.. the ones which takes time to move in positive territory tend not to perform well.
I am a trend follower.. I have around 42% hit ratio and I am happy with it.
I'm a little late to this thread, but just to complicate things further would that make sense then to sell a percentage of your position on the way down to allow a breakeven or profit on a trade where you're losing?
I always average up and I generally have a hard stop where I sell out right away if the trade goes against me. But it makes sense to me that you'd have more breakevens than losses this way yet the same amount of winners. It would take a little adjusting of the original position size to have the same risk.
Obviously the strategy you employ is an important part for any averaging system to work. But if we're mostly in agreement on averaging up, scaling out on the way down makes sense as well.
Just curious what you all think.
I always average up and I generally have a hard stop where I sell out right away if the trade goes against me. But it makes sense to me that you'd have more breakevens than losses this way yet the same amount of winners. It would take a little adjusting of the original position size to have the same risk.
Obviously the strategy you employ is an important part for any averaging system to work. But if we're mostly in agreement on averaging up, scaling out on the way down makes sense as well.
Just curious what you all think.
this is the stupidest thread, i have read so far.
why isnt it chit chat ?
why isnt it chit chat ?