As a person who had used averaging down as a way to make money I can tell you that it does generate $$$$$. The problem comes around once month (more or less) where you go down for 10 - 15K and stay up all night trying to get out of the hole. It was profitable but not healthy for me. If you have a strong health and no bad habits to combat stress (like chain smoking), then give it a try. Otherwise, beware.
I don't believe in Martingale trading either. When you get to the point where you're trading 1024 contracts to recover the loss of 1 contract, that's just plain stupid. And if youre only trading 1 contract I doubt you can afford 1024 contracts (not to mention the sum of the rest of the trades at n=2 to 9) I've unfortunately played a lot of blackjack in my life and I can tell you that streaks of 10 losers in a row at a probilitiy of winning of 49.5 happens more than you think. I'm sure it's easy in sim, but I can't imagine anyone doing it in realtime.
was done trough IB papertrader, so real time and same but virtual liquidity. on all my testing so far no, did not notice significant differences between sim and real results... and can't see why i ought to anyhow...
I didn't stick it in your face, man. The kid running this thread seems to be hell-bent-for-leather to incorporate averaging down into his trading methodology. Now, the method can work so long as you are trading with the dominant trend, but to do that, one would need a pretty solid method for determining what the dominant trend is, particular for intra-day trading. Also, that dominant trend thingy has a habit of changing on you in a New York minute, so he'd better be damn sure to cut his losses when it does ... the thing is, if you're doing this averaging down bullshit, the chances of you cutting your losses when it's time is small and none, and the tendency is to sit and hope, while the position continues to move against you and erode your capital based. And that's an example of good averaging down! :eek: You, on other hand Neke have a tendency to average down into trades that are against the dominant trend, hoping for a reversal. And that, my friend, is a perscription for bankruptcy court, especially if the person doing it is trading leveraged products. I posted the link to your thread to try to scare some sense into'em, but I see that since he's talking like it's still something that he wants to try, I don't think it worked. Oh well, as older and experienced have a way of saying ... now I understand why. Good trading, Jimmy Jam
JJ, I said earlier that it's not something I need to do but if it can improve profitability then why wouldn't I? So maybe I might miss the best entry so I buy another lot of shares .05 below the original entry once, and exit all positions .10 away with s-stops. I always set my s-stops the moment I enter a trade, and never do I cancel them. I actually have a habit of sometimes intervening to exit my positions too early because I think it looks too bad instead of letting it play out and letting statistics do its thing (and it has done more harm than good). The orders sent for entry/stop/exit are for the most part automated and I don't spend much time watching them play out because I'm monitoring my group of stocks for new entries. I'm not some 'kid' who is going to buy double his position when it's not going his way, then doubling it again when it really doesn't go his way. This would be a systematic addition to a position that still signals a good entry and would only be implemented if backed up by significant statistics. I can't have the perfect entry everytime can I? I'm approaching the final stages of it being a gray box system so you won't see me there praying and holding onto my position for dear life. I don't trade like that. But anyways, it's something Im not going to be doing because like I said (if you had even read it) it doesn't show higher profit than if I were to originally double my position. And I doubt I will ever be able to implement an averaging down strategy because since most of my systems have high win rates, it doesn't get to to stage where I have the opportunity to average in often enough. If it did, then I wouldn't have a high win rate system obviously. I guess this really should be a question about multiple entries because if I found a system like that that actually worked, then I would only be taking half the shares initially and the other half later. But if that were to work then I need to be re-examining my entries. And now I'm just rambling...
Personally I see the big problem is the wording ... average down. That is taken to mean, by many, the process by which people take a losing trade and make it a disastrous trade. If instead you'd said: I have a multiple entry strategy which takes advantage of the noise in the market after my entry signal to get my entire position at an optimal price. Well, hell, everyone would have said "cool." If its a plan that takes advantage of the way the market chops to fill at your chosen average price with great risk control - who can argue with it. If its a random reaction to market moves against you - then few wouldn't call it foolish. Cheers
bottom line, martingale is a powerful tool and most useful in the future market for it trades in technical cycles that revisit price again and again; if your trading mainly consists of trying negotiate on highs/lows cycles the cheaper price to bid and the most convenient to offer you'll be off the hook most sessions..the catch is to be very careful not to get caught on the wrong side of strong trend days: i have no much problemo perceiving strength on the upside but am not that good to spot serious weakness developing. and that's still an improvement as i was utterly and hoplessly terrible some time ago.
Perhaps I did not make myself clear. My reference to the difference in backtesting and actual trading is your emotional makeup. Watching your capital being put to work in a backtesting scenario is much different than during a trading day when you're throwing more money into existing positions. Backtesting any scenario is only a rough approximation of reality, because it can't compute the MOST important components of trading, which are the emotional makeup and flexibility of the trader. And when you talk about averaging down, you're getting into those weeds.
yes that's roughly correct...it also depends how well your account is funded. i haven't gone live yet with the sim's full depth martingaling as many adds on were not well thought trough and tested sample is still not significant enough.