I was just going on about how averaging down was a bad idea. And I tried to indicate one reason why sometimes buy and hold actually CAN work on a swing, rather than averaging into a loser to try to recover faster. And you decide to interject yourself into this conversation between Volpi and myself, by pissing on me and everything I say about why averaging down is not always a good idea. Jeez, what has your panties in a bunch? Your sim account failing you? Just put me on ignore if you cannot stand me and be done with it.
My "ignore" list has exactly zero, none, nada, entries. You and anyone are welcome to ignore me if you feel my input is worth zero, none, nada, to you. Sim account and ignore are always the retort and solution. It is no mystery why you have not learned. Trade On!
Well if it is JUST as easy then one has no APPARENT edge. IT CERTAINLY IS POSSIBLE THOUGH. But an edge puts the odds favorable for at least a small gain or BE after comm and a goodly gain if correct. There is ALWAYS uncertainty in the market. How we manage that affects our performance. When wrong I prefer to exit..exit..exit. Then double up and go in the right direction (sometimes triple up) and very quickly get back my loss and make some profit. When PA is in a TIGHT range and not too late in the range (for as the range gets longer the percentage drops employing this tactic) I have a 80% chance selling IN the top 1/4 and scalping out 1 to 2 points will succeed. Also as the range grows long in time tge odds become 50/50 that the eventual SUCCESSFUL BO will be on either side of the range. SO ..buying at the bottom 1/4 and scalping out 1 to 2 points towards the middle 80% chance it will succeed especially in tge early to middle stages of the range. Providing the range height rules, the general context, the average bar height rules all are conducive to taking the trade. And if it is in a tight range the orders I need to be entering and exiting with limit orders. Selling in the top 1/4 i do at the top of prev bars..DT’s ...top of flags ...and do so with limit orders. Exiting 1 or two points down. If price is trading at the bottom i go long with limit orders at the bottom of prev bars..DB’s and exit towards the middle of range extracting a point or two. If it is a bigger range height then averaging down in that top 1/3 or bottom 1/3 adds to the the edge that I will have a profitable trade. It increases my odds not decreases them. But that is another way of looking at averaging down that most traders would not agree with. Averaging down i don’t do, for obvious reasons, in EVERY range but if the general context supports averaging down in the range then I will take my chances. I always try to look at the general context first and may only average down on the top side of the range or the bottom side or BOTH if the context supports both.
ON..To be sure averaging down IS not conducive to do in any and every trade. There are contexts in which it would make no sense to average down and if doing so the odds are that I will lose. In such a case it actually works against me increasing the odds of a loss. I only advocate it when the context ..general..and immediate..support doing so.
Averaging down, made simple.......... If the direction is up and you go long at 8000 say, and you see 7950 and the direction is still up, then your okay to go long a 2nd amount. BUT, as soon as the direction is against you, then you need to take your bigger loss and move on. The Main issue is, if the trade goes well you might take 50pts from a single position, where as with the average in your generally risking 100pts from position then 50 more 2nd, so 150pt loss if it goes badly, and even if the market turns back your way after 2nd position, odd are you'll take BE on first position and +50 on 2nd so still risking 150 to make 50.
ON apparently does the larger moves such as you describe. You are talking about in larger moves. Rarely do I do 50 pt moves. However, There is some truth to what you are saying. If I am going for a measured move swing trade (2 or more legs is how I define intraday Mm) say on a BO and then averaging in on PB’s i.e. I am doing what I consider an intraday swing instead of just a straight scalp then the senario changes abit. I will be going for bigger profits. And not trying to BE on first entry and make money on subsequent profits from the averaging in positions. In intraday swings I am going for profit on ALL entries, initial and subsequent averaged down entries. And I know I will likely be in the market for many more minutes or even hours than when straight scalping. In addition, I make an initial SL tied to my original entry as a best guess based on my assessment of immediate PA. However, that is usually supplanted by an actual SL. That is, how far the market actually moved against me, in reality, and not my initial SL. Therefore, in the final analysis my RR ratio is based on my actual SL or adverse movement. So, when the market doesn’t come close to my initial SL then turns in my favor with all my averaged in positions my RR changes for the better because in actuality I never had to risk the entire initial risk. I only care about actuality in math in terms of the metrics of the trade. If it doesn’t turn in my favor sufficient for exiting and actually hits my initial SL then yes I take a bigger hit and I recuperate that by doubling or tripling up in the new direction. When I am wrong then..I am wrong ..and when my original assessment of PA and and my entries and exits based upon that assessment are faulty then I have to accept that and mitigate the losses and try to recuperate them. No point in holding on and hoping. The market has proved me to be wrong. If I am in a trade anticipating a MM and it doesn’t happen after I loaded up then I will simply take whatever, the market gives me.
Numbers entirely hypothetical, doesn't matter if your swing trading and it's 50pts or day trading and it's 10 then 5pts at risk. I missed out aswell, when your 3 contracts in averaging and the market blows well past your SL, then that SUCKS hard, major downside to more positions.
The only hypothetical figures are my initial SL and PT based on my best guess which in turn is based on how I interpret PA. My entry is real. And it immediately bracketed with a hypothetical hard SL and hard PT. I say hypothetical because neither as been reached yet. MY initial RR is also hypothetical as I as of yet don’t know how much I will actually end up risking. As the trade develops I get my actual risk and actual profit emerging. Once I exit the trade the math for the trade is based not on the hypothetical BS of initial risk, PT and RR but instead it is based upon what really happened. As far as price blowing past my SL or my PT the most that I can ever remember that happening by is maybe a tick or two. I am not placing mental stops or mental PT’s but hard ones. However, I will adjust them as price unfolds. I simply consider initial risk and initial PT as hypothetical and actual risk, PT is well what actually happened in the trade. In the end I am only risking what actually happened and only profiting what actually happened. And my RR is actually only what happened when the trade was done. That is the only metric that matters to me in terms of SL, PT, RR.