Check out $COSTaverageMAN and his Want to Share posts on Elite Trader. He averages down and makes a bundle. How he does it is mystery to me. He averages down he ain't certainly a loser. Ironically, the best trader that I have come across on ET.
well pension, you don't just breakeven, now you are sitting in the exact same position, same size, but at a better price. Not sure that means much to a directional trader, but for those of us that trade spreads, it can mean quite a bit. Sometimes, after several of those avg down breakeven I can get the whole spread, both sides to be profitable.
Steve, You state this person averages down and certainly not a loser. You also state that albeit, ironically, also best trader you have come across on ET. Up to this point, I have no problem with your reasoning. Except this statement "How he does it is mystery to me." complicates things. It's hard to judge trading when the understanding is just not there. If you will, please clarify. Thank you
So, as one leg goes against you, you average down, but at the same time, you add to the other leg to "hedge" your trade. So in essence, are you really averaging down given that you add to the other leg as well?
well, each leg is independent of the other. So depending on what happens, I may at times (different times) add to the winning side and add to the losing side. Better though if I can add to both sides when they are losing. Doesn't do me much good if they both hit at the same time. Then I am just stuck with the same spread at twice the size. the main thing is, I treat the whole spread as one position for profit taking purposes. So then I am just a target shooter. When the whole thing hits the target I close out everything. That's why my account balance and trade log make me look just like any other trader. There will be some profits and some losses. hard sometimes to communicate with other traders because sometimes I am talking about individual legs and sometimes the whole spread (which at the moment for me is 4 pairs, 2 long and 2 short.)
I started this discussion with a dilemma, one that has yet to be discussed. Using entries with a fixed stop and no averaging might result in multiple small losses, these small losses could accumulate to become, large losses, similar to losses found in averaging down with a fixed max risk. Using entries with dollar cost averaging might result in being right with small size or wrong with maximum size.
if you learn to read the market, the dilemna goes away ,shrinks becomes a non dilemna,what do you watch,what internals,like the nfl, your watching the offense and defense battle for 3 hours at a time
Ammo, Some would argue that if you learn to read the market well enough the need to average down goes away, so exactly what's your definition of "learn to read the market?"