Enron may be a bad example for they did have at one time a AAA rating on their debt. Each $10 drop probably did seem like a bargain to some people.
After the last time I had loss cos of my stop loss, I carefully looked at the daily chart to check the daily high and low. They were above and below round numbers and half-dollar numbers. and I said 'damn' ! Because I have been carrying out research on price clustering on US futures intraday market for nearly 1 year, and even have found strong evidence that traders are particularly active/clustered above and below round and half dollar numbers, but I did not exploit the finding and incorporate it into my strategy. Thanks you Handle123, I will start to make better trading plan and do backtesting too.
The dilemma will be present until you probably lose everything. This is no way to trade. No modern trader rationalizes trades and setups. Everything is automatic. The rush is in using more effectively machine learning to develop robust algos. No investment no gains. Can you win an F-1 race running on foot? This is what you are trying to do. If someone has spent 60K to buy Trading System Lab do you expect to win money from them? Or even tools like Price Action Lab. Some people still trade the way you do but they are the last of their kind. You have to transition to next level and get tools that give you the edge. You cannot be the edge yourself. Look at what is happening in hedge fund world. They are looking for new talent and there is shortage. How do you think you will compete in a trade when a hedge fund is the other side? By averaging or looking at the RSI? They know better.
I agree and also disagree with your statement. True that this is no way to trade by keep averaging down losers. That's poor money management. You add to winners not losers. However, I disagree with the assumption that you cannot outperform the market and hedge funds because they have all the fancy computers and talent and you are just an amateur competing with a slugger on the baseball field. If that were true then why are several of the hedge funds losing badly this year and in 2007 and 2008 and even several in 2009. If you buy a simple index fund you would be beating MANY of these hedge funds with all the latest gadgets and computer models. I think this game of trading is more about being one of those little fish that is attached to the whale and swims with him. All we need to do is understand where those whales are moving by following them. That's where these indicators like MACD and RSI help and others. But like anything else you have to know how to use them. If you are blind you can not see what's right in front of you. So I use these indicators to help see what's in front of me and what the market is doing. Just my 0.02
The higher the timeframe, i.e. the longer it takes to complete the move, the more chance there is of something going wrong. There are basically three trading styles, the two fat-tail being long time frame and multi-year or very short timeframe similar to HFT. The third is the one everyone uses, all the timeframes in the middle. Here's the the problem with that, you have forces on both sides pulling and pushing the market, last report was 85% of trades are HFT. These are the fighting trades. What is meant by that, you constantly have to adjust, have an automated strategy then it needs constant programming, backtesting, have a discretionary system then you need to adjust on the fly. It's normally an 80% in 20% out approach, it can work but is very fluid. All three are valid but here's the problem, as volatility increases if you are consciously adjusting the trades due to not having an 'exact' entry/exit methodology, which is normally the case in the middle tier, you are behind the curve. You cut your losses by following your rules without exception assuming you have them - effectively an automated strategy, know when a trade is fundamentally correct which is experience, or fight your way up and down the whipsaws which often just use varying combinations of the first two with no real plan.
Tehchnical analysis and fundamental analysis still used among trader to trying analyze the trend market, if any trader can mastered one technical and fundamental analysis hence both might will become good combination as preparation before start trading