It's okay, as long as you don't let your losers run, I do better with obviously with losers kept on a tight leash. So trading NQ say, first entry 10pt SL, if you can get it -5pt, uptrend is still valid then only 5pt's of risk and 10-30pts of upside. It's better than trying for the -5pt SL position and missing 100's of trades. Do the math, are you better off, taking a 2nd position or not. I've done it, I'm better off!
There is no right answer, at any point if someone loses mental control and goes all in or refuses to take action there account can get blown out. However, if someone has the mental fortitude to follow rules and not break them, than there's no reason they can't add to losers without blowing up their account assuming they have a plan. Trying to say there's only one way to do it, is just ridiculous. The bottom line is you need a plan that works and you need the mental fortitude to follow the rules, either you can do it or you can't.
The eternal problem with adding to losing positions is that the original premise for the trade entry has typically gone out the window and it’s devolved into a breakeven endeavor.
That's a very valid point and no argument that 99.99% of people probably trade it that way, including myself(when I use to average down a lot I would be begging for break even) But I still stand by that it still comes down to people not having a plan and not following it. I've seen a trader who averages down on losers, but he doesn't do it randomly and also he gets paid big on the trades that work, as he isn't going into it trying to break even, his intention is to trade that way and make money. Overall I understand and it's best to stay away from doing that, but my only point is that I think people focus too much on the "right way" to trade or what others are doing, when in reality it's up to the individual to make a plan and have the mental fortitude to stick to it.
Adding to losing trades is stupid, like going on a 2nd date with someone who argued with you on the first date. Or re-electing someone who... "Feed your winners, starve your losers"
Just about every blowout I've seen was the result of adding to a losing position. What's insidious about it is that it will work multiple times - and when it doesn't the results are catastrophic. In other words, a bad habit gets reinforced and then it destroys you. You would be far better served adding to winning positions. And that's not just my opinion - many of the FU money traders I've met over the years will press the living piss out of a winner.
The right way to trade is not to add to losers, but instead reverse and go short. Investing, especially buy and hold, is a whole other story. Too often some comment about something totally unrelated to trading because they don't trade or just don't get the concept itself.
It's okay for Scalping, demo day today so firing out loads of trades, I only average down once try for about 50% of the way to the SL lower is better, I have an exit place mind, where market is likely to tank hard, if SL hit and market doesn't tank then I get back in. My average 1st position Risk:Reward is 1:2 area and 2nd position is coming at 1:3, kinda stupid to not take the 2nd position with that kind of R:R, I'll add 2nd position increased odds on SL hitting but 3:1 even with a 40% profit rate is still over 10 trades.... SL -6 * 10 = -60 * 60% loss rate = -36pts Profit 18 * 10 = 180 * 40% win rate = +72pts Total = +36pts. First Position at 60% profit rate. SL -10 * 10 = -100 * 40% loss rate = -40pts Profit 20 * 10 = 200 * 60% win rate = +120pts Total = +80pts.