Some of the above... was ES and some MES. As far as micro goes i was, and am doing, some testing especially with averaging down techniques to see if they would work with the micro. Using some of the averaging down techniques and do it in such a way that makes it worthwhile for say a trader with a very small account. In other words, using the same tactics that I use with the Es. I know it will work with the micro as they pretty much track together, however the question is; is it worth it? Or do the techniques need some modification? At one time I had a very small account. I have traders asking me about starting with small accounts. I have never ever believed the BS of 1% to 2% risk of ones account. At least not for a scalper. To me it is a ridiculous metric if one has trained themselves to be a decent scalper with a high win rate. I am still testing. I think the micros might have the potential for a trader who is learning to scalp to perfect his methodology and do so with a small account without incurring too much risk and blowing the account before they learn. And if the trader can actually grow the account they could try stepping up to the ES with some minor modifications. Perhaps that answers your question. Most new traders aren’t going to have 25,000 to 100,000 to start off scalping. Most probably are in the 3000 to 5000 dollar range, I would guess.
ON i have been doing it for years. It isn’t something new to me. From what you have posted (tell me if I am wrong) you have tried techniques of trading WITHOUT averaging down and gotten bitten in the ass more than once. Or am I wrong? It isn’t an idea worth trying. I I already know it is. At least for me, it is. But can it be modified and made even better. For me that is the question.
The more volatility the faster it works. Less time in a trade. Instead of 3 or 4 min maybe 20 or 30 seconds. Over and over again.
I have read through this entire thread and would like to say that i average in nearly every trade and the two things mentioned by other members that strike me as the most true are this: (1) BINGO! My strategy is to short stocks that have been pumped heavily on no news or mediocre news...after my initial entry the price nearly always goes against me (higher) but I literally win 9/10 trades by holding them until the hype wears off adding to my position at points of resistance. The problem is exactly what is mentioned above and more...that 1 out of 10 loss is a MAJOR loss and can offset the 9 wins that are usually not home runs. Another issue is that it ALWAYS takes more time to turn around than expected...time I have my money wrapped up in a losing position bag holding. I started this adventure thinking i would be a day trader and get forced into swing trader status because of this "strategy". (2) Loss aversion and gambling is exactly right. I am inexperienced and i hate to lose. I've tried various strategies like 3 bar play, stop loss reentry, etc...and I lost every time...And it hurt every time getting Stopped out instantly. And i know the problem is with my lack of experience choosing the wrong entry point. So i started doing the method above (short pumped equities) and it felt good to "win" so I've kept doing it. I spend a lot of time every day educating myself but for the time being i am going to offset my lack of skill with averaging in. I know this isnt long term sustainable...holding short positions in highly volatile companies for up to 2 weeks is a nightmare waiting to happen and i am working on other methods every day. Just thought i would provide the thread with a prime example of averaging in the wrong way.
Averaging down in every and any circumstance is most definitely a critical mistake. The context must be right for it. I enter my trades with a premise formed that I base on present and past PA. I don’t just average down because I am losing and hoping to stop the loss and make myself whole. Sometimes it is better to just exit a trade flat out ..take the loss...then enter again in another opportunity. I average down to increase the probability of the trade resulting in a successful trade. And this can be done often in the right context (very often) intraday on a 5 minute chart of the ES. Why? Because of the mean reversion tendency of the ES over and over all day long. Thus I employ this technique. But I must do so when it fits the context of PA. Second, averaging down or scaling into a losing position if PA appears to supports it then I am increasing my profit when it goes my way because I am getting it cheaper. The key here especially for scalping is not to get greedy. I take my profits when the market gives them to me. Third if I judged wrong then I exit out out of all averaged down positions and look for an opportunity to double or triple up in the new direction. Then I get back my loss in 1/2 or less, in movement. I know some will say well the fact that you averaged down means you were wrong from the start. I beg to differ. I can be right on the move and early on my entry. Why should I take a loss on an early entry by dumping it when my premise for the move is still intact? No. I will add until my premise proves to be wrong. It isn’t a matter of not accepting a loss, but it is a matter of increasing the probability that the trade will end up being a successful trade. Remember it is extremely difficult to enter at the right tick just when a move will go my way with any adverse movement first taking place. So the question becomes what will i do in adverse movement? There are other applicable concepts to averaging down but these are a few.
Unfortunately "averaging down" does not convey the deliberate, strategic intelligence and execution finesse of what volpri describes and documents so well. "averaging down" implies either: 1) a badly, hastily improvised response to an unexpected move against a trade, or 2) random attempts to catch falling knifes. "fade strategy" or "limit entry fade strategy" seems more apt for what volpri describes, in his case its for scalping, but it can also be used for tight-stop entry on what becomes a swing trade. A variant is a "scale strategy" per Robert F. Wiest's "You Can't Lose Trading Commodities" (take the title w/ a commodious grain of salt)
Some call it scaling in. I like to call it averaging into a losing position to mess around with the gurus who denounce. Lol. It really is the same thing except in my case i do for reasons other than just hoping to get out of my loss. I want entry into cheaper prices as my premise is still in valid. I don’t want to exit with a loss on an early entry on move that I think will end up being a quite a profitable move.
i so agree with you. averaging is the best idea according to me as well, it's never just the downfall even for a "falling knife", there is always going to be a bounce or a little up movement where it is better to exit with small profits than huge loss.
I'll restate my objection on it. It works for an instrument (stocks) without an expiration date, and which is not leveraged.
Ever notice the warped self-destructive tendency for traders to add to losing positions under the delusional guise of “averaging” - but only the smart swinging dicks seem to be the ones to keep their powder dry when they’re underwater but then they press the living shit out of winning positions.