Guess what. Finally...some losing trades. Overnight..jsop..and other anti-averaging downers can now leap for joy and say “I told you so!” Enjoy! Well...at least...the first two trades! Now here is a prime example of taking loss doubling up..getting wacked again...taking the loss...then averaging down on three more trades getting back the loss plus getting back about the same amount again and ending day positive. I could not for some reason read the pressures right this morning shortly after the open. So, before a body could cook a really good breakfast I was down over 800.00. Does that stop a winner? No way Jose! You keep playing the process. 7+16+20+13+20 = 76 contracts traded. Now this is little tiny MES. Remember that. Looked like a real mess. But see how averaging down pulled me right back out the hole and into the money. Maybe all those guys attacking Mr T got me off balance? Anyway, I had to rush to his defense which I did quite adeptly to the chagrin of his detractors. One zapped me off his “white list” whatever that means (sounds abit racial). But I never asked to be on his little list anyways so...toodle-lou. Is there ever losing trades averaging down? Of course. Here is proof! Of course comm was a little over 185 bucks but still........I can afford to go to dairy queen. First chart Second chart cleaned up abit so trades can be seen better and the explanations Last chart cleaned up without explanations and showing my MM target being surpassed minutes after my exit for what would have been an even better profit. But I had that phone call to make.....excuses...excuses..
You are a better trader than I, because I would not have the guts to just outright long with the equivalent of 2 mini ES in this highly volatile environment. To me that is averaging in on a scale that can get out of control? Like last Friday. You kept averaging in on a loser, and got LUCKY on the EOD bounce. If there was no bounce, you'd have taken a large loss. I think I understand what you are doing in a way. Take a large loss on a failed average trade, but then enter with a much larger initial position and try to go for a smaller target, to get back to BE. Is this a correct assessment?
Well I was willing to press it with that outright 20 lot because of the previous 4 bars where price traded above MA’s after being below it and 3 of the were 4 bars bull bars plus bar before entry bar showing alot of buying (tail on bottom). I reasoned at the moment the pressures were up and likely would go up as a successful reversal as my stoploss too had just gotton hit. If market was as weak as it appeared be on the entry of that prior 16 lot short then that 16 lot SL should not have been hit, but is was hit, so I reasoned “I am on the wrong side of the market for the second time.” I quickly changed that. As far as last Friday there was a rhyme and reason to it but it was a risky bet being that close to the close. I probably should not have taken that trade but I did. Generally it is better not to average down within the last hour of the session. Sometimes I press my bets. But if I had loss I would get it back the following week and then some. This I believe. As far as your assessment it is partially true however, I don’t always choose to get back at just BE. First instance, if I am not mistaken, there was more than one opportunity to get out at BE way before I did in fact exit on that all in 20 lot trade. Actually, I would have been better taking the BE and entering again long at a lower price But I got busy looking for some stuff out in the storage building and just left the orders in place. When I came back I saw it had executed.
And today is another example of where your play would probably have worked, based on the action from 3:50PM ET. Like 45 points up in NQ from then until just after RTH close. I have never said I was an anti-average, by the way. I just think it is a bad idea in this current vol environment. But dude, keep on rolling if you can figure it out, which you seem to have!
Actually, I was on the correct side of the market in my first trade but had my SL placed wrong. I mean I can look at that now and see that to be the case. It opened gap up. Then we got 2 legs down as bears tried to take the market down. I should have taken note that in The larger context we are bullish and after two legs down by the bears we would probably get a reversal after or maybe a little sideways action so I should have had a bigger SL. But for some reason it just didn’t register with me about the two legs down leading to some sideways action or a plain out reversal.
I was able to successfully average down MNQ with multiple contracts. And ended up making money. On the NQ, however, it was scary. I will be super careful how I average down that one. I didn't have enough margin and IB automatically liquidating one of my contract. Thus I took a loss on that 1 lot. And the rest of the lots I held on and now in the afterhours it's coming back nicely. So averaging down can work but you gotta be supercareful and make sure you have enough margins so IB doesn't auto liquidate you at the worse possible price level. I just got out of my remaining 3 lots. So I took a loss on the 1 lot that IB autoliquidate. Took the loss for no good reason. But I'm really glad it can back!
Let's say market is going down. There are 2 ways of trading. 1. By professional trader Short the market with huge quantity. As price goes down, close some position. As price continue to go down, close some more position. Leave some lots behind and hold it for very long to profit massively. 2. By newbie trader buy the stock. As price goes down, buy some more. As price continue to go down, buy even more. Finally the mind goes crazy. Then flatten all positions with huge loss.
#1 doesn’t work if you are scalping. #2 doesn’t work if you are scalping but do not know “when” and how to average down May I add a #3? #3 averaging down if you are a scalper and know when and how to do it can most definitely work. AND that is what I have been showing.