AVERAGING down/up = success?

Discussion in 'Risk Management' started by buybig, Feb 15, 2009.

  1. buybig


    Bingo... too my point... everyone says professional money mangers do it.... no one can qualify how they are successful.. where they arnt.. their mistakes.. etc

    seems to me the reason is "just because someone else said so". or retail traders are too stupid to grasp the concept.

    Now is you opp.. please enlighten by qualifying aforementioned statements.

    thx :)
    #11     Feb 15, 2009
  2. You need expertise in price action and risk management to even attempt to dwell with the devil.

    Anything below those levels and you are asking to get burned.

    #12     Feb 15, 2009
  3. I averages down and up thursday and friday trading es.
    I intentionally enter with 1 contract and scale in 1 contract at a time. I did take a small loss both days before turning profitable. Had I had the balls to not take the loss in the first place then I would be really profitable.
    Let me give you an ex
    I went long friday at 834 (missed my 832 entry) it went to 837.5 which I should have gotten out by 836 resistance. But I thought that since the market gave back the news of the bailout (the drop from 867) it would go to 843-45 my next resistance area.
    Well it went down and I bought another at 832, another at 828. I had a stop for 1 contract at 825.5 (right under the pivot) which caused the loss I was reffering to.
    I waited till eod when it rallied to 35 and i got out with a small profit (~350).
    The day before was the opposite. I shorted at 813 thinking it would go under the 812.5 support which it had for a few seconds (about 809 I believe) then kept rallying. I kept shorting along the way. Again I took a loss bec I couldn't bear the pain of being down a few g's and letting it fly further up. And of course it tanked to 805.5 afterwords. (I got out at 813. when it didn't break, running up passed the 20 ema and faking the bull run and then tanked, only then to have a maga rally.)
    So why did I do it?
    Because the news of the bailout was going back and forth. Most earnings announcements where bad, few where good (coke etc..) So I figured it would be a choppy day.
    Or maybe I got lucky
    #13     Feb 15, 2009
  4. Average into the longer term trend only.
    (Forget constricted or constricting markets.)
    Enter at overlapping s/r levels, fibs.
    Don't get crazy. You are *building* a position,
    therefore you are starting with small size and
    adding small size.
    You better be right! (That's what positive expectancy means.)
    Oh, and... Don't trade with the grocery money. :)
    #14     Feb 15, 2009
  5. Averaging combines the downside of fear, greed and hope into a single activity.
    #15     Feb 15, 2009
  6. buybig


    again, vague answer. NOT busting your chops here.. Say i could read the tape like a mistro.. i was wrong but am still confident in direction.. what would a professional do?

    why cant the retail trader do the same w/ a finite SL/risk tolerance..

    not being a smart ass here...

    just want qualification/quantification of statements/ideology..

    thx all :)

    NOTE: to the root of the Q.. when/if would avg up into a winning position.. avg down in a losing position.. same for the reverse..

    no one has presentd a reason to avg up

    EDIT: Tommy contributed.. thank you
    #16     Feb 15, 2009
  7. I could give you so much more but as long as Puretick is a sponsor of this site I refuse to provide quality trading information.


    #17     Feb 15, 2009
  8. Stosh


    Sunday eve: I have an open 1 ES contract from Friday at 823, and just now averaged down by buying another at 813.50....so now I have 2 contracts with an avg cost of 818.25. If it works, I'll report back....if not, I won't. Stosh
    #18     Feb 15, 2009
  9. buybig


    10-4. thx for the honesty.. dont see it too often..

    #19     Feb 15, 2009
  10. mokwit


    Most people average if they have a small i.e. 10-20% loss. It works 4out of 5 times in a bull market and then takes away all your gains, once it turns to a bear market it takes away your account.

    I only do it in stocks which are below a LT low (not average, low) and only in cases where my loss is 50% or more - note these are stocks being entered at the percieved bottom of their cycle like a value investor to capture 300%+ up cycle move. I account for a 50% draw down in this type of play and this is reflected in initial position size.
    #20     Feb 15, 2009