How about this, Build a position rather than averaging down and scale out, BUT and BIG BUT, ALWAYS ALWAYS have a total stop loss either with price level or with a dollar amount. I will do other conversations on trading as well as setups but check out the 5 that I have on you tube if you want http://www.youtube.com/profile?user=TradePilotPro I will soon be doing a daily one on price levels and value areas for anyone who wants the info as well as break out areas Just hit the subscribe and you will automatically get a e mail letting you know when it is posted in the morning. Try to remain calm when trading it will help. Take Care, Joe B.
Not for nothing, he absolutely nailed the early drop on Wednesday. If he has a system, he doesn't actually have to prove anything, he just needs to trade it. Good trading, JJ
Averaging down WITHOUT stops and WITH excessive leverage = inevitable blow up Averaging down WITH stops = inefficiency
well, if one were to average down, the last two days would bring in nice gains. Today Thursday also looks like a winner.
why would you post a bogus equity curve for us, instead of your equity curve? Or, at least a mock up of a real equity curve? why haven't you laid out a specific plan for dealing with the heat, as other people in here have inquired about it? since you learned this at a prop firm, why haven't you specified the account size you need to make this happen, since others are speculating about it? why are you focusing on averaging down instead of scaling in? In short, there are unanswered questions, and that equity curve you posted is not real. I could never follow this anyway, but I have a hard time taking this seriously at all...
An equity curve does little to nothing to defend the strategy. Simply put, if a trader has a winning system/method, averaging down guarantees mediocrity. When a trader enters a position, there are five possible outcomes: 1. Large move in favor of the position (big winner) 2. Small move in favor of the position (small winner) 3. Little movement in favor or against (breakeven) 4. Small move against the position (small loser) 5. Large move against the position (big loser). Even an outstanding trader has to accept the inevitability of 3, 4, and 5. Indeed, sometimes there is no oil in the well, for it is dry. However, one must move on, and keep drilling, seeking wells that may prove themselves full of potential. In order to have the reserve capital with which to average down, a trader's initial position must be small. It is impossible to go full size and average down; a trader cannot have it both ways. If one averages down, one is guaranteed less exposure for situations 1 and 2, and more exposure for situations 4 and 5, EVEN IF ONE USES STOPS. If anything, outstanding traders should do the opposite of averaging down and average UP (scale up).
I really have nothing against the original posters' stratetgy of averaging down, however he wants to do it, it's his money, I don't care. But you have posted nothing short of an excellent analysis on the art and science of Position Sizing - The Advanced Course. This type of modelling is required to scale (pun intended) the higher levels of trading, and is the key to making outsize gains with minimal risk. If there is a Holy Grail in trading, it resides in this direction, not that of order entry. Good trading, JJ
Hi, JJ You're right. Traders are told the key to successful trading is (1) to cut losses short, and (2) to let profits run. The first is easier than the second, for most; and averaging up is the ultimate way to doing the first. Gotta go.