======== Yes, with preplanned money management %. Actually averaging works real well with mutual funds, they know thier stocks; but MAINLY get paid on gross assets[hundreds millions,billions,] not profits. Several entrys on a stock you know, works on occasional pullbacks; but wouldnt call that averaging down.Preplanned stop also.
Do you have any idea what his average return per annum is? He has to allocate a large sum for averaging down. If the bank stock only has shallow retracements, he will make money but only on a small position. If he decides to average down on more frequent and tighter basis, he needs large capital. So, I think it works but depends on what kind of returns you are looking for and the capital you have to commit.
Why would you add to a losing position? If you want to scale, make sure you scale up. Add to winners and cut losers. That's my motto
The Wealth-Lab website has lots and LOTS of very profitable systems that average down. One example is "Oscillator Pullback" whose source code (in WL) is available free here. I've attached a table of the performance of some of these systems. You'll note that Oscillator Pullback is ranked number 5; perhaps it may amuse you to glance at the code for numbers 1 through 4.
i tried an intraday average down method on FX once for a couple of weeks, thank goodness it was on Demo. the risk:reward ratio is just off the charts. its like 1000:1 risk reward. plain crazy. :eek:
I never think about risk vs. reward when I trade. I use wide discretionary stops. If my setup is there Iâll take it. If it goes against me and I see an opportunity to average down or up (according to my plan) Iâll take it. However, the skilled trader knows when to reverse at a certain price level.