How do you know your fixed stop if you don`t know how far a move can extend?And why do you think that short is somehow different then long? Your decision about averaging down is based on? Whatever it is,consider the ''Doomsday argument'',and hyperbolic growth especially when you are at the end of the trading session.You might not run out of money,but you`ll run out of time.
trending is easy to read using the internals,up vs down volume and adancing vs declining stocks,then a corrrelating instrument like spx with transports,spx and transports have major and minor support/resistance and on trending days it's good to watch major,6 or 7 day moves like the one that just ended ,use the minors,these points are also good spots to add /reduce an averaging position,personally,i just keep averaging short and catch the pullback to collect,in the spx, as it is a mean reverting index,that happens in aapl too but so seldom that the averaging wouldn't work.it would ,but the payouts would be a long wait and picking spots tougher
buy em all at zero. it costs less and there really is no pain and suffering. retail will never average up, only down. they luv to lose, they just lose............. es
the houses average up all the time and then race to collect profits on the turn,resulting in fast drops,so there is nothing wrong with averaging,there are experienced people doing dangerous jobs everyday and the more dangerous, the more experience necessary, higher risk, and higher pay,in the current economic environment, averaging up is imho the more dangerous of the two,there will be more sellers on the way up when wrong than buyers on the way down
I think you need specific entry and exit criteria when averaging, as well as position sizing rules that are established before you even put on the first trade, robot like. Not while in the midst of the trade, which is why I automate the whole process. And donât let the position get so big that it becomes too emotional. It helps to follow any news related events to try and anticipate how they may affect future direction. I like it when a stock is tanking before an earnings report and then see it spike on the release. It looks like price manipulation to me, so I can anticipate a sharp turn coming.
For reference, that is a cropped pic from this thread (second to last post on the page) http://www.elitetrader.com/vb/showthread.php?s=&threadid=223293&highlight=Fibonacci