I think you should ask yourself wether you want to average down because you don't like taking losses or because it will increase the profitablity of your edge. Honestly, if you have to come to a forum and ask this question it's probably because you don't like taking losses.
It's not about losses, obviously even with averaging down there will be losses, that max monetary line in the sand that I have discussed. The reason for such position management I think it's obvious. In my case it is typical to have a good read in direction but watch multiple areas of potential support or resistance, quite hard to determine which is the one that will finally produce the reversal. You could argue to try and retry and re-enter but then that leaves me vulnerable to my worst enemy ever, messy action leading to the death by a thousand stops. I think that explains it quite clear and would be surprised if I was alone in this subject.
here's some tech for ya. a retail trap ipo price rise on lower volume and 3 moves to a top. a blow off exhaustion gap reversal thru the 14.50 level classic reverse h and s death spiral to the 4.2 expansion lots of pain and still no gain. of coarse you are a short trader................ carry on. es
why would you want to scalp or average down and why did you place your stop there, why did you enter, what was your profit target...stops seems to be the crux of the op's,that is my reason for averaging, it seems the bots are hunting the stops.. if you take your avg monthly profit and divide it by 20,i would rather take it all at once than give back half in dribs and drabs over 20 days,assuming one is profitable 50% of the time
every serious trader who averages in has looked at those charts of trends that move and never correct. The difference is, we think long and hard about how we will handle it instead of dreaming someday we will be on the right side of it. just because you average down doesn't mean you won't make more money than you ever dreamed of the few times it trends in your favor. but most of the time it will just bounce around (chop) until it takes out everybody's stops, long or short. Then it will move, maybe in the same direction, maybe back the other way.
Same reason as you, and even though you can re-enter this does not absolve you from getting chopped to death. I like to lose when I'm wrong, not when price is undecided. At the same time, I would like to point out that choosing mean reversive instruments helps and/or mean reversive time ranges like for instance, lunch. It is easier to tell when an instrument is breaking a range (if against you time to take losses), than when a trending instrument is actually reversing and not retracing.
I could be wrong here, but on one hand, the OP is asking for help, yet on the other he talks trading wisdom. Any ulterior motives Daring or bad read from my part?
that's the way I read it, I told him how I do it and his reply was to tell me why that won't work. But then again, 99.99% of what I post on the internet is just bullshit, so when the .01% topic comes up that I am serious about I can see why nobody would take me seriously,plus, everytime this topic comes up it brings out the crazies, and I have no need to argue it or convince anybody, since the truth is most on this board CAN'T average down because they only have enough left to put on one unit.
Most definitely a bad read, I'm exploring a topic, researching it, but I do have vast trading experience, so perfectly capable of doing my own thinking and research when it comes to other thoughts and ideas. I don't take anything for granted but most definitely appreciate trading conversations and input from others.
There is no other way,besides the correct one,never mind the samples,trials and experiments.Do not fool yourself,this way you`ll blow up even faster.Or you can try and crack the correct way.The choice is not that big.Thinking of developing a system with the 'ave down' thought in mind is disaster.Think about the system which buys/sells few ticks above/below bottom/peak.