Average down disaster

Discussion in 'Risk Management' started by innovest_11, Dec 4, 2008.

  1. Down -5000 because of using averaging down today, keep buying when it goes new low, and it keeps dropping and dropping and droppinggggggggggg...........................

    Initial loss of -$1200 balloon to become -$5000. Cannot believe my months of profit just wiped off in one day.

    I don't think I'll do anymore averaging down and if i do, i better watch my size
  2. Watch your size - what are you averaging into?
  3. Average up/down works amazing when you understand CONTEXT. Meaning you know that price tends to overshoot but the real direction lies in waiting. If you don't understand the context, new lows (or highs) can just keep going and going and going......

  4. You're not alone there. It's one of the mistakes I keep repeating every couple of months and it always leaves a dent in my balance. It never works, yet for some stupid reason I'll give it another go. It's a psychological flaw that's tough to beat.:confused:
  5. 5Kyou say? It took me a lot more to understand that averaging down ....... needs to be done with a much bigger account. :D

    If -5K brings your account to your knees then you are seriously, and I mean by about 500K seriously under financed for this kind of strategy to work long term.
  6. ggoyal


    well, atleast you learned your lesson. trust me, when you "get it" that 5k will be made in a snap.

    just don't average down again, if you can do that. you just progressed to the next level.
  7. This is like a 6 year old preschooler mistake, and you are still making it.

    How do you ever imagine yourself to be a profitable trader, if you can't even follow directions?
  8. I think i need cooling period to get "myself" back, but it is a real pain to absorb, anyway, i think this disaster will come sooner or later, so have to face it and deal with it. :( :(
  9. cipher4d


    does your strategy/method require you to average down?
  10. averaging down only *somewhat* works if you are in it for the long haul and have a thesis. Oh and yes if you are *not* leveraged. And never have to exit or care to exit. Look at Bill Miller and Fannie Mae. I'm sure it'll be a $50 stock in about 15 years after they recapitalize (and the dollar is worth nothing). Come to think of it, I don't know what Bill Miller's thesis was. heheh...

    But if you can't afford to wait, averaging *NEVER* pays unless you are lucky. For the 3 times it works, the 4th time wipes out your profits and then hell of a lot more. You'll wonder why you call yourself a trader with a broken strategy like that.
    #10     Dec 4, 2008