actually....averaging down losers (a.k.a. modified martingale) exists among institutional traders who abuses the huge capital they have access to. (i think) we all remember Nick Leeson who was averging down on the Nikkei and there are those four traders in Australia.
Macro, So lets say price is moving directionally long for the am session. It is moving up let's say 2 points for every 1.25 point retracement. i.e. a "channel". Are you taking profits on each retracement? If so can you illustrate how this particular "channel" would provide you with profits. Thanks. You have an interesting system. D.
Leeson's crime was not really averaging down; he had no "system" to speak. Rather, he was trying to muscle the Nikkei in his favor after the straddles he sold went against him. Ironically, the more he bought, the more it went against him, as the arbs took advantage of the futures being out of fair value. He should have delta hedged or taken a loss. His ego would not allow him to do either of those, and down went Barings Bank.
lol this thread is so silly. macro, you're wrong, i got tired of reading your posts because of how ridiculous you sound. the market does not understand COVER SHORT, LONG, COVER LONG, SHORT orders, there are only BUY and SELL. Whatever advantage you think you gain from "letting shorts run" or whatever can be had by simply placing buy orders lower? You make no sense and are your reasoning is fundamentally wrong. In fact, using more than one account when trading like you are describing is actually to your detriment as your margin requirements are in fact double. not to mention increased trading costs of putting on and taking off the initial offsetting positions. regarding the martingale concept itself, it sounds to me like none of you have an edge in your trading. let me throw out a novel idea (earth shattering, i know): if 95% of newbies blow out by putting on a position and letting it go against them (or even worst, adding to it as it goes against them more) until they get a margin call and lose all their money, how would one go about benefiting from this? not that this would be an edge on it's own, unless of course you think the benefit derived from providing liquidity in certain low volatility markets is not worth the risk involved
Sounds like school teenagers paper trading. One is ordering pizzas, the other went pee. Hopefully the last one is watching the multi-billion dollars paper strategy in action. Is it real ??
>>>Am I doomed to eventual failure with a system that scales in as price goes against me? <<< If you keep going against the trend----you will pay dearly. When a stock is going down, it is because a huge number of people are selling and there are few buyers. Also, you never know how low a stock will go the same way you never know how high a stock can go. You may have gotten lucky to fade the trend which makes sense only if you know with certainty that the big institutions are buying that same stock at the time you are buying it. What if they are selling and you are the buyer???? Who do you think is the smart one????
>>>Am I doomed to eventual failure with a system that scales in as price goes against me? <<< It can be very dangerous to blindly fade individual stocks. But I think some good scale-in systems use indexes like QQQQ. One system uses the 5-day RSI. Start scaling in when it drops below 30. Start scaling out when it exceeds 50.
daurd-----------yes that is somewhat correct------- http://www.ttrader.com/mycharts/display.php?p=35208&u=macroevent&a=MacroEvent&id=1511 the upper left hand text at 1217 should say "long sell-to-cover" minute by minute BUYS and SELLS and this is only at the even price levels----- .00 to .00 {this does not show .25 to .25, .50 to .50, and .75 to .75 for a total of 4 levels simultaneously that can be traded}. lurefo-----------actually you bring up a good point, only teenagers would not have their heads filled with engrained preconceived notions. yes it is real, I will get you a pm this week that will bring some light on this method. igor-----------------whatever you say boss!
MacroEvent, At the time of London's bombing, the reason you shortened the chain of long buy orders and shifted down the short cover orders, is it to adjust the long/short ratio to match a new projected range? By thinning out the long/short-cover orders you reduce overall long orders so if the underlying moves toward your new projected range (presumably lower due to the London news) the long/short ratio is reduced. May I ask how often you adjust your projected range and how often you adjust your long/short ratio to match the new range?