Average Up on Strategy Performance

Discussion in 'Risk Management' started by Here2learn, Nov 25, 2014.

  1. Turveyd

    Turveyd

    But as there are longs and shorts in the market and if you establish we aren't all living in our own personal Matrix's, surely the MM what ever it does will cost someone and make someone else money.

    The difference is, you'd take profit at 20 and let the loss run until margin called, that's where they win.
     
    #11     Nov 26, 2014
  2. Scaleout.Scalper

    Scaleout.Scalper Guest

    Average up only works when you think the next big move is with extreme momentum, otherwise it can hurt you, many times quite badly. And if you knew, you would go all in from the start, but then again you never know.
     
    #12     Nov 26, 2014
  3. They cannot win against my martingaling baskets.
     
    #13     Nov 27, 2014
  4. Turveyd

    Turveyd

    Unless you have a stack of Martingaling baskets open and deeply in the red at the end of the week and you have to close them all at a HUGE loss, like last week.

    People trade with SL's and yes learn how to actually trade rather than run some EA for a reason.
     
    #14     Nov 27, 2014
  5. I don't know of anyone (trader or investor) who has been successful by never taking profit. Even Buffett, Mr. Buy and Hold Forever, takes profit occasionally. Another great example is Karl Icahn on his Netflix investment. I don't remember his exact quote but it was something like "Being a seasoned investor, even I know after making 427% it's time to take some profit off the table." I completely agree with the philosophy behind your rule though. You MUST let profits run... and run, and run and run and run.

    "It never was my thinking that made the big money for me. It was my sitting."
     
    #15     Nov 28, 2014
  6. loyek590

    loyek590

    like I said, it's a rule we all break, but I agree with you, the less we break it the better

    when I started trading forex, I had a paper account and a real account. I got busy in the real account and neglected the paper account. When I logged back in to the paper account there were all these amazing unrealized profits. Why? Because no one was there to take a profit.

    I'm certainly not a long term fundamental forex trader. I just watched short term scalpers let small losses turn into such large losses that they got wiped out. And I figured, "Why not just do the opposite?"
     
    #16     Nov 28, 2014
  7. I think you're a smart dude loyek, stay profitable...
     
    Last edited: Nov 28, 2014
    #17     Nov 28, 2014
  8. And to answer OP's questions... Averaging up will NOT turn an unprofitable trader into a profitable one... For the same reason doubling up in a casino won't make you a profitable gambler. Averaging up wont necessarily make an already profitable trader even more profitable (although it could). Averaging up likely will only result in increasing volatility in your equity curve, which very well could make you unprofitable as all the volatility will make the emotional rollercoaster that much more difficult to deal with. Plainly stated: averaging up will work for some and not for others, averaging up alone WILL NOT make you profitable. Period.
     
    #18     Nov 28, 2014
  9. Turveyd

    Turveyd

    I left an order on the once forgot about it, order hit with SL set, didn't trade for 10days or open account, opened a trade looked at the positions charts and WTF about +$600 profit, initial reaction did I just open trade at $100 per pip, panicked closed trade instantly, still there, 1 of my best pip profits.

    100% FLUKE though, never to be repeated I'm sure.

    Sure can't trade that way, got to maximize your profit while also minimizing your risk, for me that's taking what ever the initial move gives me and walking away.
     
    #19     Nov 28, 2014
  10. Turveyd

    Turveyd

    Averaging up, say Long DAX 9800, then again 9850, a move to 9900 ( strong Momentum fair enough ) gets you +150pips, 9825 is your BE point, 9800 is -50, the odds on your 2nd trade going very far as it's already ran 50 is reduced, so more risk and less potential.

    Ofcourse averaging down, long 9850, then again 9800, sounds good and in chop fine, but as it's went to 9800 odds are it's trending and could go lower before getting the BE+ at >9825.

    But the real issue with averaging down, which is actually logically fine is............

    Your way more likely to hold to 9750 for a -150 pips, where as odds are if it runs to 9850 odds are you'd of already bailed for less that +50.

    And that's why this is a negative sum game.
     
    #20     Nov 28, 2014