have your friend run his "sim" against the feb (or was it march??) 2007 50 point drop in the SPX (in one day) then come back and tell us the results
The only argument that i can see for this doubling position strategy is that every time you double your positions, it brings your avg price pretty close to the current price, and its easy to get out be+1.
Your fears are correct... just can say when. The one outcome you can control is "prevent individual large losses". Averaging into losers brings large losses into play. If the market is going to get you, at least it should be "like being nibbled to death by ducks"... not "cut in half by a Great White".
forget about this sim trading, you need to feel the pain with taking losses using real money.. if you really want to test you theory. then come back & give us a update?
TS, 1. Read this: http://en.wikipedia.org/wiki/gambler_fallacy 2. Get off the demo acct. and start trading without using lottery strategy. Almost everyone make 'money' on demos. Most people lose in real trading due to several human nature effects. 3. If profitable in real trading for 45 consecutive days, pm me.
The double down method worked for Nick Leeson......until it didn't. http://youtube.com/watch?v=tDrHwUrQwTs