AVERAGING UP (and/or anti-martingaling) your way to profits

Discussion in 'Trading' started by 1a2b3cppp, Mar 1, 2011.

  1. This thread is all about ADDING TO WINNING POSITIONS [​IMG]

    Do you add to winning positions?

    If so, do you add smaller positions with each subsequent add? Or equal positions with each subsequent add?

    Or larger positions with each subsequent add and greatly increase your average cost and run the risk of turning a profit into a loss with a small move against you?

    Finally, can random entires + adding to winners be used to form a profitable strategy when you are unable to predict market direction? In other words, I know all of the millionaires and gurus here have magic indicators or possess the knowledge to make MACD and other indicators work profitably for them (as they always claim in the other threads), but for those of us without such knowledge and abilities, how feasible is averaging up to creating a profitable strategy?

    Finally, where do you guys put your exits when averaging up?

    (for the sake of definition, let's define "averaging up" as adding to a winning position in any increment, and "anti-martingale" as doubling up on winning positions after every fixed increment)
  2. Redneck



    I don’t have bandwidth to respond in a coherent way to your question right now…..

    But I would like to leave you with this little thought if I may


    If I can trade… then obviously I can trade my way out of a deficit

    And if I can trade my way out of a deficit…, then why in the hell would I want to add to a loser (of any sort) and make it harder on myself

    Personally I don’t …..

    Yes some are going to win... but the one(s) that doesn't/ don't - will eat your lunch

    I simply take the loss, and keep on truckin


    Now obviously RTM traders are notwithstanding

  3. euclid


    If your going to add to a position you need a good reason. Just because it's winning (or losing) is not a good reason, unless you think your personal P/L is a predictor of future price movements.
  4. I like 2,1,1,1, type progressions or incrementing 1/2 your net position rounded down in even intervals. This is typically a one way road and you close out on the first interval pull back. Your risk is front loaded and once your past 2 intervals you've locked in a profit.
  5. spindr0


  6. I can neither predict direction or recognize momentum. If I could predict direction I would be a millionaire by now.

    "Neutral or hedged option strategies", you mean like buying long straddles, strips and straps all over the place?

    How do you structure your trailing stop so that it doesn't get triggered by "noise" (or all the other losing trader's stops)?
  7. Random entries? Seems like this could generate huge winners if you catch a trend. Do you get stopped out like crazy a lot of the time?
  8. spindr0


  9. It's hard to quote your posts when you reply in my quotes. lol.

    How do I know what's noise? I don't. After trying to study price movement for 3+ years, I don't. Price will look like it's gonna go up, then go down just enough to stop me out, and then rocket upward.

    Noise is the crap that stops you out without price changing direction. And it's impossible (for me, not for ET millionaire gurus) to know in real time if it's "noise" or "trend reversal."

    That's why I'm trying to learn to profit without predicting direction. Price will eventually go somewhere. I'd like to go along for the ride when it happens and not be affected by "noise" and not care what happens in the meantime.
  10. You might be interested in reading about the "Turtles" if you haven't already. This was a group of trend-following traders whose methods used to be secret but have now been revealed by at least one of the former turtles.

    Adding to winners was a key part of the turtle method, as I recall. They used some form of average true range to determine when to add to a position and where to trail stops. After the trade had moved some distance in their favor, adding to the position allowed them to potentially turn the trade into a "home run" and the trailing stop placement served to lock in some profits. Most trades do not in fact turn into home runs but some can be expected to, and it only takes one or two to make a good year.

    That said, I'm not sure if it would make sense to add to a winning position if you truly believe that price action is random. The turtles were trend followers and obviously believed in the tendency of prices to trend in some non-random way. Maybe adding to winners might still make sense without this belief but it seems contradictory to me somehow. I need to puzzle this through.
    #10     Mar 1, 2011