Average down disaster

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

  1. You should quit trading. Really.

    Averaging down in a sideways or bull market is kinda understandable. Averaging down now is pure stupidity.

    1 day to wipe out a month's profit spells FAILURE for you. Seriously, quit while you have some equity left.
     
    #11     Dec 5, 2008
  2. The OP doesnt understand CONTEXT, that is the key to everything.

     
    #12     Dec 5, 2008
  3. It took me blowing two accounts before I learned to never avg down again.
     
    #13     Dec 5, 2008
  4. maybe averaging down as a SCALPER. But trying to hold on in these kind of markets is suicidal.
     
    #14     Dec 5, 2008
  5. Thanks for your advice, what i understand by Context from you is the direction it is going right? Meaning go with the trend and not against it?

     
    #15     Dec 5, 2008
  6. Maybe i too unwilling to take a small loss, and got into trouble by adding size, and going against the trend, thanks for all advices given
     
    #16     Dec 5, 2008
  7. It's suicidal for scalpers as well. It's a really dump practice, that's why I use stops on ALL of my orders....
     
    #17     Dec 5, 2008
  8. I think its just a simple case of understanding your system/method, if you have one.

    For me, I know that when I enter a trade it "should" go in a favorable direction almost immediately. Therefore my stops are really tight. If it doesn't, I know my analysis was wrong (which happens all the time), so I simply exit.

    I don't think you have a plan when you enter a trade. You probably are still in the "hope" phase.

    A bad plan is better than no plan at all, trust me.
     
    #18     Dec 5, 2008
  9. Exactly!

     
    #19     Dec 5, 2008
  10. I worked out a whole trading scheme once that was very martingalesque, it [in backtest] was very profitable but it was definitely going to blow out an account at some point. The reason I never took it live was that if it made a lot of money before blowing out, fine, fund it again and run it some more, but if it blew out right at the get-go I could not afford to fund the account again.....
     
    #20     Dec 5, 2008