Average down - small wins, big losses?

Discussion in 'Risk Management' started by Peblo, Oct 8, 2017.

  1. volpri

    volpri

    Specialized in averaging down? Or maybe averaging down is what they just did?

    However, as specialized as they may have been they obviousley were not in specialized in risk managment not psychologically prepared to bite the bullet ...swallow..the loss BEFORE it got out of hand and regroup and survive to trade again. Yes, losses can get big averaging down if one is wrong, however, they can also get big with any other kind of trading tactic that fails. And the flip side is the gains can be enormous from scaling into losing positions. That is the uncertainty of the markets. It is how IT IS. We have to learn to deal with it.

    The two examples above are in no way a reason to not average down or scale in to a losing position but they can stand as a real lesson on what not to do when attempting to scale in.

    There is a genuis in scaling in to losing positions. Most traders cannot see it because they never think through it. And it has to be a deliberate..planned out..thoughtful process..executed with discipline.

    Discipline is simply “being responsible to do WHAT you are supposed to do...WHEN you are supposed to do it...and HOW you are supposed to do it..even when you don’t FEEL like doing it.”

    Now that is something worthwhile to tape in front of ones trading desk instead of useless things like “losers average down.”
     
    #81     Jan 20, 2018
  2. schweiz

    schweiz

    Averaging down is only riskworth if the trend is still in the good direction, so it should be just an adverse temporary move that you misinterpreted

    If the trend is not in the good direction anymore you risk alot as the moves in the direction of the trend are always bigger and going faster then countertrend moves. So you will have to react quickly.

    Averaging down will make it much more difficult to finally cut your losses if it goes really wrong. And most people cannot do this as they should. Their loss will be too big or they think wishfully to get out as soon as they recover some of the losses. Which often does not happen anymore...

    If people take a second position at a better price, they often forget that the profit from this second entry is for part lost in the extra loss of the initial position that went further in the wrong direction at the same time.
    If prices drop 3$ you can make a 3$ better entry for the second position but at the same time you lose 3$ EXTRA in your first position.
     
    #82     Jan 20, 2018
  3. Overnight

    Overnight

    Not true. I have been doing that and have made good money. But I haven't been doing it in a "traditional" way. Time is the edge in any market, among other things. But time is the key. Time.
     
    #83     Jan 20, 2018
  4. schweiz

    schweiz

    If it goes so good I suggest you always skip the first signal and take a double position at the first average down. You will make much more money. :D
     
    #84     Jan 20, 2018
  5. Overnight

    Overnight

    I have a live journal in the journal section. Can brief through it at your leisure. No pressure. Skipping the first signal and doubling down on the second? That is the road to ruin, and not what I am ever on about. Remember, TIME is the edge, man.
     
    #85     Jan 20, 2018
  6. ironchef

    ironchef

    Why is it the road to ruin?
     
    #86     Jan 20, 2018
  7. Sprout

    Sprout


    If you have the time, and feel the activity is worthwhile, maybe you can take up your own challenge. There is no perceived benefit for me to do so, it would just entail more work.

    I understand your desire for proof and without said proof surpassing your own criteria of judgement, no respect can be given.

    I wanted to operate in good faith and give you the benefit of the doubt distinct from the snarky remarks of you just trolling me.

    However, your tone is clear.

    I accept your lack of respect and validity for my pov.

    May you experience all the success you are desiring, deserving and are capable of.

    Happy trading to you!


    btw, if your looking for pre-market calls, Rickshaw man’s thread is pretty epic. It’s not my style nor fits with my personality but I respect it. He continuously documents the things that you are looking for and highly profitable to boot!
     
    #87     Jan 21, 2018
  8. volpri

    volpri

    Sprout pay me no mind. I don’t disrespect you or your method. Just joking around. One thing you gotta say about Jack Hershey. I never knew him to charge a dime for any info. May he RIP.

    Good luck trading!
     
    #88     Jan 21, 2018
  9. speedo

    speedo

    :D
     
    #89     Jan 21, 2018