that's the way i trade lately, especially on futures, doubling up at times if it keeps tumbling. works well most times but got caught a couple of times in some nasty tumbles that never seemed to end...and paid for it.
"Don't be soar.....buy some more!" That's my battle cry! Good to know that Bits and I think da' same!
Don't do it. Averaging in once after the initial entry is fine. But continuous averaging in, into a loser is the worst thing you can do. Trust me when I tell you. Every time I lose, it's because I averaged in forever. Of course the avg price gets better and better, but the security keeps advancing against you. It's not worth the pain. Catch falling swords, short rockets, but when you are wrong, accept it, take the small loss, and try again at a better price. I cannot emphasize this enough.
Well you're right of course but I thought we were referring to short term events not arguing with the market. Arguing with the market is holding a position and buying more (justifying your decision) because it's undervalued despite the fact it's selling off day after day. Catching a falling knife would be like AAPL free falling after the options scandle news hit the wire. Panic and fear plays that are based on herd emotion. I was bearish on APPL even before the options news based on two things: 1. APPL's chart looked overextended 2. I expect recalls due to defects (not documented) Despite my feelings I caught the falling knife. Did I nail the bottom and sell today's top for a nice chunk? No, but I did make a nice profit, I rarely capture the exact range. So catching a falling knife by my definition, is exploiting an event not averaging down, hoping for the best or ignoring reality.
I trade them. I trade falling knives and rising knives. The sharper the knife, the better. http://www.dacharts.org/archives/GoingLite/GoingLite_style_writeup.htm Goinglite
Paul Tudor Jones has a sign that says " Losers Average Losers". http://www.trading-naked.com/DailyThoughts.htm Goinglite
Not sure I understand... 1. Do you find a falling stock and short with the trend ? 2. Or do you wait for it to bottom before buying? cm69
Hi infolode, Yea, I am talking about short term events. What I mean is that let's say a stock dropped 3 points in 5 minutes and you buy it thinking it's gonna bounce and if it goes against you another 30 cents, buy some more, but if it goes against you again, it is much better to cut it. In other words, there has to be a point where you have to give up your first batch of shares and try again or it'll ruin you by getting you out at the dead bottom and THEN it'll go past your initial target. Cashmoney, 1. Do you find a falling stock and short with the trend ? Only if I can get in early. 2. Or do you wait for it to bottom before buying? If I missed the move, then I look to catch the sword...