The context of course is spot on. You can trade/invest in companies in the context of holding onto something for years. You can trade monthly and yearly trends. You can weekly swing trade. Ect ect ect. You MUST MUST MUST know the simple details of a trade. You first figure out what to trade. You figure when to trade it. You figure out how to trade it. You figure how long you trade it for. Be cold and calculating. If you feel any emotional attatchment or bias at all slap yourself in the face.
you need to tell us what stock it was and where you bought. i can tell you where you made the mistake based on the chart not only "averaging down".
The mistake was buying into a confirmed downtrend. If you need to see the chart to know what the mistake was your not an experienced trader and therefore shouldn't be giving advice.
averaging down kills you once in a while.....I almost got killed in HIG today, but was able to reverse and finish green on it. averaging down on RTM can really blow you up......unless you got $$$$ in capital.
Not really. More like when you understand the subtleties of the markets you know when avg up/down is a safe play vrs when it is an absolute no no. Really, it comes down to experience.
Unless you have a clear cut strategy that you are willing to use day in day out....I am inclined to think you don't....then the problem with your persistent averaging down is basically as a result of your denial that your initial trade was a mistake...a recipe for disaster. Incidently, what was it that you were trading?
Context? Large capital? Experience? WTF? Nick Leeson brought down Barings bank in 1995 by averaging down: http://www.amazon.com/Rogue-Trader-...=sr_1_1?ie=UTF8&s=books&qid=1228574834&sr=1-1 Keep averaging down and you'll eventually blow your account. You can count on it! Just take the damn loss and move on.
My perspective is intraday, thats what I am speaking about when I mention subtleties and context. Anything outside of that is a different ballgame to me. Also, I believe the OP is describing a day trade gone bad, not some rogue trader who tried to hold up the Nikkei for months.
If you're like me and try to enter where most guys have their stop, you often see your entry missed by a few ticks as the market runs off in your direction. In this case, I don't consider it 'averaging down' if you take on 1/2 position as prices are nearing your entry point, and then take on another half a few ticks later, when the result is that the total position meets your R/R needs. A hard stop is always required (except for those Super-Genius Traders on here who claim to trade without stops). I say this having experienced (countless times) the god-awful feeling of getting stopped out on that last gut-wrenching move against your position, only to see the market run off in the direction you thought it would. Anyone who believes that stops aren't run and weak hands aren't washed out in instruments with strong daytrading interest is living in a fairy tale. Anyone who complains about it needs to man up. Averaging down like the OP did isn't this, IMO. Rather, it's when you know for a fact that the market has turned well and truly against you but you're adding multiple times in the blind hope that the loss on your screen will go away.
Right, there is a big different between strategic averaging vrs blind hope averaging. Strategic avging can earn you a very high winning percentage to the skilled trader whereas blind hope avging will bail you out occasionally while simultaneously reinforcing a very bad habit.