I am glad I don`t know how to average, because if I knew, I would have to unlearn that habit. If one can`t figure out the right entries, then one always have the choice to not enter in the first place. Averaging a loser, i.e., selling a rising market or buying a falling market is ultimately a losing strategy. If not today, then tomorrow. Even if you are the house and can add to infinity against a strong directional movement, your small winner is still a loser compared to what could have been earned by being on the right side of the market, i.e., opportunity cost. A thousand stops is obviously an exaggeration, but when entering around a reversal zone, one will not take that many stop outs and truth be told, a few stop outs on minimum size is not that painful, compared to getting stopped out at the turning point on maximum leverage. If the move have a good R/R to start with, one will quickly make back the losses and then some when one finally catches the move. There are different ways to work a turning point. One way would be to trail an order above/below the market. I assume the correct way to average is within a tight predefined zone planned in advance and then taking the stop no matter what. It is still a flawed strategy, because one is setting oneself up to lose with maximum size and win with minimum size as the average averager usually scales out of his winners. I wonder how high the win percentage needs to be in order to have positive expectancy with such a strategy? Cut your losses and ride your winners, not the other way around. Good trading all.
LF, That is the way I'm trading too, but I"m conscious of Vol saying that when he started averaging in.... he caught more trades and his profit over time increased. At least that is what I understood him to say. All to often reality is different than logic. Reguardless, I'm working more on getting tight/good entrys, so I'm not averaging in at this stage of where I"m at!
Two posts worth reading a second time. Is there a quicker way to way blow out one's account than to add to losers? Speaking from experience, the answer is no. This plan is particularly deadly if you are trading against the trend. As LF correctly points out, if you win, you are likely winning with minimal size, but your losers are likely lost with considerably larger, maybe multiples larger, size.
20 points between sunday night and now. fish in a barrel! anyway still rocky start to the week. support zones might get twice position size. shorting R smaller size.