Averaging Down the real Holy Grail

hm.. makes sense, it sounds better than selling put method employed by VN.

 

<i>"Could you explain this in a bit more detail? Genuinely curious. Many thanks"</i>

Question not directed to me, but here's my take. I trade ES contracts in multiples of two. If for example I want to be short with market trading at 1574, the 1575 = 1577 levels may both be visible layers of resistance.

Perhaps the ideal entry is 1577, but price action may very well stall out at lowest layer of resistance 1575 and never rise into most ideal trigger.

One solution is shorting 1/2 position 1575 and second 1/2 at 1577 for blended entry 1576.

If price action fails below 1577 without second 1/2 filled, I can always add on at 1474 or lower as price then moves in my favor.

That is one way of averaging in, with a specific strategy in mind. Shorting into resistance or buying into support at two similar spots on a chart, when neither seems more ideal than the other.

*

Making a habit of scaling into longs as markets drop will invariably hit a period like this afternoon. How many layers of "support" were obliterated in the -30pt ES drop? Instead of trying to time the counter-trend bounce (which didn't happen) inside bigger prevailing uptrend, the big money was all made shorting the short-term downtrend.

By the time any long trades were profitable this afternoon, ES was down -20pts off the high. Scaling into reversals as a habitual method is inevitable suicide. Believe it or not, there is risk when going long these days or any days, for that matter.

 

Yeah, averaging down in ES today would have proved just how well it makes you money :eek: :eek: :eek:

~Cx

 

Yep, I also learned it at a prop firm.
Real money machine.
Newbies here just don't know how or lack the cajones.

ADK

 

Nice. Somone who averages down with a prop firm referring to other traders as "newbies". This comment really made my day .

~Cx

 

I'm not saying it can't be done, but I listen to the man...

 

Averaging down will work for you.
You need some deep pockets.
Inflation will make you whole.
Be patient.

P.S.: this only works if you go long

 

true, need decent acct size but it's a much powerful tool.

 

In fact!

I think people are quick to criticize here because when done correctly and responsibly it is indeed a very powerful tool.

ADK