Is that they are trading someone else's money with no risk to themselves. Pretty huge difference wouldn't you say?
Yep, if I run a fund and I use average down as part of my trading strategy, I wouldn't put a single penny in that fund. And I would pray that my emotion wouldn't get to me, because emotion could cause people to do dumb things (like risking their own money in desperation)
When I was first starting out after university, I worked for a company that was the Administrator for PTJ's funds and yes, he too has averaged down. Also, I don't know a single hedge fund mgr who doesn't have a substantial amoiunt of his net worth invested in the fund he runs.
I am surprised that he does, but come to think of it, he got many traders working for him. Even though he doesn't average down, there would be a few traders who might do. Are you sure it was averaging down and not the other way around? On statement, it will look similar tho. Isn't it easy to see if someone average down or not by looking at their performance versus how the market is doing. But maybe that's just nonsense? Question: When you average down with a risk limit, say 2% of your capital, how does it differ to someone just risking 2% of their capital and doesn't averaging down? What's the performance difference? What's the emotional difference? Looking at the picture, I am thinking maybe he was trying to prevent other people from averaging down, so he could do all the average down himself? :O Average down could be the Holy Grail!!!! LOL
i doubt that very much... on thing is average down another thing is scaling in and scaling out which in fact he does a lot. In interviews he refuses averaging down completely so i doubt it about what you said...
As for fund manager having substantial amount of capital in their fund, I agree with you. (Beside those mutual fund managers who work in banks.) The response I provided to lescor earlier was an IF scenario and it just apply to ME only.
EVERY trade you make you should have a price target and an EXIT price if the trade goes against you. It is a bad idea to add additional funds to a trade gone wrong. It is good to protect a trade with options but adding into losers hoping they will recover is a recipe for disaster. Adding into a losing trade is not wise money management.