ALL In,Out Vs. AVERAGE In,Out

Discussion in 'Strategy Development' started by aeliodon, Jun 25, 2007.

  1. Royal Rumble

    Let's go:

    AVERAGE IN:

    Pros:
    1 A more 'humble' way to trade. Not top/bottem picking. Giving the position some breathing room to work itself out.
    2 Less stressful as the initial positions are fairly small and there is very little concern if the market moves against position as you can always average down.
    3 Don't need to use stops - hence - panic sell at the bottem and panic buy at the top. More breathing room to get out at smaller losses.


    Cons:
    1 Invites the dangers of overtrading. You can average in and out all day or too frequently.
    2 Less stess can mean less focus.
    3 If not using stops then you can easily get 'married' to the position thus watch losses grow and grow or profits shrink and shrink.

    ALL IN:

    Pros:
    1 Promotes the sniper type of mentality as there is very little room for error.
    2 Less overtrading as you get one shot to nail the entry and exit.
    3 Using stops limits losses and promotes not getting stuck on the position.


    Cons:
    1 More stress.
    2 Using stops probably means 10 minutes later most times the market will be trading in a position where if you had held you'd probably have a much lower loss if not breakeven or small profits.




    The Bottem Line:
    Know what you're doing - nearly every strategy has advantages and disadvantages and you have to know both - especially the disadvantages.
     
  2. I think the superior method follows:

    Average In

    Limit average downs.

    Add to winners by buying the pullbacks in the trend.

    Avoid using stops - but after the the trend has clearly changed used every pullback to scale out of the positions with a smaller loss - rather than panic selling the low.

    Averaging in is superior because:
    Lower stress
    No panic selling out of good positions
    Hold positions long enough to the big wins
    Smoother equity curve
     
  3. Position size has the biggest influence on psychology and every one knows the key to great trading is psychology.
    Good trading is boring and conservative.
    Going ALL-IN is just an exercise in arrogance. The only two guys that should be going all in are the two elderly professors on ET who I admire that never have a losing trade ever as they pick every top and bottem in every market. The rest of us mortals are better off with a more humble and conservative approach.
     
  4. bluud

    bluud

    ???????:confused:
     
  5. GTS

    GTS

  6. Averaging out is not inferior. If you have that much confidence that the trend has ended then you should not only go ALL OUT but also REVERSE position. If you don't have the confidence to reverse the you're better off averaging out.
     
  7. TM1

    TM1

    All in, no stops, mostly.

    Here's why; if you aren't confident of the trade you're putting on, why do it? Scaling in/out is admitting defeat before you start, I just can't get past that mentality, it's like second guessing myself from the get go.

    No stops simply because it is too easy to get stopped out on a temporary reversal, although a stop on a short sale makes more sense to me only because of the natural overall tendency of stocks to rise over time, but this is obviously largely dependent on the types of securties you are trading and your time frame. Bio's for example could be suicidal without stops on either end.

    In the end though it's whatever works for you, both strategies will work well under certain conditions, imo.
     
  8. I see all market movements as opportunities. If I'm trading the trend, I will use every pullback to either reduce cost or add to the position. If the trend breaks out to new highs, I will take some off the table to lock in profits (just in case its the top) and hold some just in case it turns into a huge trend. If the trend reverses, then it gets tricky: I'll cover if it happens on news/data release and accompanied by a huge surge in volume/momentum. Otherwise, I may it as an opportunity to reduce cost and then use all pullbacks in the new trend to cut losses and reverse position.
    Another senerio is a reversal of a 'reversal' in which case, the original 'reversal' of trend was really just a huge pullback down to stronger support in a larger trend on a larger timeframe.

    Regardless - you don't ever want to be panic buying and panic selling in the market or else eventually you get addicted to the emotional ups and downs and become a addicted-to-action compulsive trader.
     

  9. I'm in this camp. "All-in" and monitor position. Sniper a trade, grab the goods and go. Don't give them time to figure out you're there, where you are, where your stops are--and take you out.
     
  10. Guys that go All In:

    Buy when 100% Bullish

    Sell when 100% Bearish


    Guys that Average In and Out:

    Buy when More Bullish or Less Bearish

    Sell when More Bearish or Less Bullish



    What you don't know can kill you and I just think its safer to acknowledge you don't know it all so don't bet it all on one shot.
     
    #10     Jun 25, 2007