Averaging down has no meaning on its own, it is just a set of trades with each one having its own chance of winning. Except when you need to win more on each trade to recover from losses then your chance of “winning more” may be lower. You could just as well replace averaging down (making subsequent trades on a single stock), with “averaging down across multiple stocks” - making different trades on completely different stocks that have high chance of winning. Basically there is no difference whether you average down XYZ with XYZ vs averaging down XYZ with ABC and DEF. In the end this works like a casino and you simply need more winning trades than losing (or generally higher average profit per trade than loss).
I mentioned adding to winners which is just as important as adding to losers. Once you get to a certain level as far as cars are concerned and you have very low rates even without a membership or seat lease which easily done with negotiation and lots of volume you come to find that cutting losses will cost way more than averaging down due to slippage. but yeah.. I am apparently suppossed to show a log of my trades and my statements in order to prove what? when you start growing which I hope people do you will start to find out that your strategies just don't produce like they did because of slippage and games being played on you by the algos. Why do you think entire industries are built on position in que and direct market access? slippage is what kills day trading once you get to a certain level. It is just not cost effective to get in and out 20 times aday even with FREE TRADES which doesn't exist. holy crap if someone voicing there opinion answering someone simple question leads to this rabbit hole of buried garbage then my hypothesis about this site is correct. 94,000 losers. of which .000005 % ever stay here longer than a month if they have a brain. I do not after years of watchng charts. the hft has figured out how to use mind control thru the charts. this is true. just like a beating drum it is possible for traders to stare at the screen and get hypnotized. be careful . studies have been done.. take breaks and average down for your health and well being. BUY GOLD BUY OIL BUY STOCKS after the GDP. qtr point cut by the fed next week. full on bullish dow 35,000 by middle of 2020. never stop buying
It's bad because it lacks discipline. You enter a trade for a reason. You establish a max loss and exit strategy before you enter. That trade goes against you. Now you enter the world of mental masturbation telling yourself 100 reasons why it is still a good trade (none of those reasons were why you entered the trade). You are probably trying to "not take a loss," although you already have taken it. So you already should be pulling yourself from trading for being tilted, but instead you do the worst thing possible and double down, and in doing so tilt the p+l slope so your losses now start almost taking exponential form. What happened to your exit strategy? Your max loss?Is this new slope the p+l rate of change you wanted when you entered this trade? If so why didn't you put on that delta in the first place? It's probably now no longer your trade, you no longer own it or have reason. Instead you are with a rabbits foot a four leaf clover, singing some voodoo song hoping the market returns. You certainly aren't trading anymore. I always cut losses immediately and only added to my winners. Preferably I don't want to lose at all, but if I am going to lose, I want to give back gains, not take losses. Might not be PC... but there was a saying on Wall St. "Averaging down has killed more Jews than the Holocaust"
it is really unwie to believe in all the rules that are in the books and all the wall street adages. if you read the posts i said you have a max loss dollar amount and also no one said they were doubling down? if you are trading 1 lots sure then adding is doubling down.
Double down was meant figuratively more than literally. To suggest getting yourself deeper. Heck, maybe you triple downed. "it is really unwie(sic) to believe in all the rules that are in the books and all the wall street adages" I agree, I doubt more than 6,000,000 people literally died averaging down. Probably more like 2-3 million.
You'll seldom have your full position on when right, but will likely have your full position on when wrong. Furthermore, you will tend to remove a portion of the position when it gets in the money and choke off full profits when right.
%% Exactly; DAL, GM went bankrupt, thats why its not a good idea @ all. Could ,work well on SPY......................................................................................
Scaling in as it moves is one’s favor is an ok tactic if one is a swing trader. But it doesn’t work too well if I am intraday scalping say the ES for 1 to 6 points which is generally how I basically trade. Scaling into a losing a losing trade (aka averaging down) is a tactic if done properly under the right circumstances can be profitable and increase win rate and profits and reduce losses. Example: PA has been trending down in a channel. The channel is about 6 points wide. I would only scalp this channel instead of intraday swinging it. By intraday swing I mean 2 or more legged moves within the channel.The strategy is to scalp in a way that fits the size of a min scalp, the width of the channel, the general context, the present PA, and the odds. 1) the size of a min scalp in the ES is 1 point. In other words, if I don’t think the odds favor a trade will give me at least 1 point in the ES then I skip the trade. To generally capture the min scalp the average size bar in the range needs to be at least the size of the min scalp I would be going for and I prefer it to be bigger. Just a visually glance is usually enough to confirm this. With the Es most bar are going to be a point or more anyways. 2) width of that channel needs to be at min 3 times as wide as the min scalp I would attempt to take. Therefore, the BIGGEST scalp in this 6 pt channel is 2 points. Of course, if it gives me more I will take it but when deciding on setups I ask myself “looking at the PA in the moment, and considering the overall context, do I think price will move in my favor 2 points before it would take me out on my SL.” The min scalp I would attempt is a 1 point scalp and that could be quite often. 3) General context = weakness it is a bear channel which means lower highs and lower lows. Pressure is down. What was the prev context before the bear channel began? For examples sake lets say it had been in a range and the channel on the 5 min chart was a BO south of the range. The general context thus make the channel more conducive to shorting setups as opposed to long setups. However, I must keep in mind that bear channels on a 5 minute chart are bull flags on a larger TF (...15 min..30..60...) and that bear channels usually end up with BO to the upside. That ALWAYS has to be in the back of my mind. This channel needs to have at least 20 bars in it to be called a channel otherwise it is just a bull flag, a pause, or a BO in whatever the market was doing before the flag started. 4) the present PA ...lets say it is at the bottom of the channel. Do I short? No no. But price is going down should i not short? Heavens no. What should I do? Best=nothing. Next best= go long for just a 1 point scalp back up towards the middle of the channel or wait for PA to get back up to the top of the channel and look to short. If PA is at the top of the channel I will look to capture short 2 points. 5) The odds. They are actually good. In channels most BO attempts fail and price goes back into the channel. Average of 75% of the time BO’s top or bottom will fail. Probably more like 85% topside BO attempts will fail and price will go back down into the channel. And 70% bottom-side BO attempts will fail and price will go back up into the channel. Why a higher percentage of topside BO fail? Because it is a bear channel and inertia...pressure is down. BASED UPON THE ABOVE THE TACTIC IS: Short in the top 1/3 of the channel. Add to that original position if price moves against you. That is; average down. Even if it goes above the channel a little ways. As long as it doesn’t BO above the channel with subsequent Higher High FT bull bars outside the channel. If it does I look at exiting with the loss immediately. Then I double up and go with the new direction. In these shorts I try to get 2 points. Sometimes settle for 1. At times I will make money on all contracts. Other times, I will make money on all, but BE on the original entry. If attempting to go long I do so at the bottom of the channel and try and capture just 1 point not 2. It is more risky to average down at the bottom of the channel in this senario as general pressure is down but it can be done. I just can’t greedy. 1 point scalps from the bottom side is the goal. This is a tight channel I am extracting profits from. Note: entries top and bottom I like to make with limit orders ONLY. NO STOP ENTRIES. At the top limit order entries at the top of flags..previous bars..close to DT..ETC. Entries at the bottom limit orders at the bottom of flags..prev bars..close to DB..etc. SL’s are outside the range 2 to 3 points on topside or bottom. Dump point is any BO with subsequent FT bars or SL. By FT bars I mean multiple bull bars in sequence with gaps between close of the bar and prev bull bar or PA staying above the range for 4 or 5 bars. Turn the concepts around for bottom side. No channels on 5 min chart this morning. However there was a range and I will show chart of trades taken while I was typing the above on how to make money in a tight range without averaging down ...have a high win rate..etc. And basically pull money out of a tight range that is going nowhere and to do it by scalping using some of the above concepts. There I just posted how to extract profits in a tight channel scalping 1 to 2 points. Am I afraid that I have given away a secret that will stop working if too many do it? No! First of all most won’t believe me nor accept the concepts. Second, those that do won’t have the discipline to pull it off. Third most institutions are out to get my position on such small moves. They are after each other's money and bigger moves. Fourth if too many do it then it will actually work better! Might wanna test the ideas out on a sim. Have fun. Will post the charts shortly. Gotta make some coffee for the wife.
Ok here are the charts from todays PA and how I extracted profits from a tight trading range on a SIM in less than two hours from the open. This was done trading one contract at a time. 9 trades. 7 short. 2 long. All winners. These were small trades in size (one contract) for two reasons. A) I want to show how a trader with a small account can trade 1 contract in the ES when it is basically going nowhere and still make money. B) to leave room for adding (averaging down) which no real opportunities presented themselves in this case. Well maybe one or two but I was busy typing the previous post. Why done on a sim? Well I am a diabetic and sometime my thinking gets befuddled and since I have a one track mind (I am not a multitasker) AND I was typing the previous post on trading channels while I was trading this mornings range I am not going to risk real money while busy doing something else. I do not feel too well this morning. As it turned out my thinking was fairly clear most of the time and all the trades were winners but it could have been the other way too. While done on a sim the points are still illustrated good enough. The trades are put on by the platform as I took them not drawn in manually. I started off shorting. The sequence is as follows: 5 shorts, then two longs, then 2 shorts. The red is entries for shorts and magenta is exits for shorts. The green is long entries and the brown is long exits. Context: The overnight was in a range see orange horizontal lines. After the open PA began a smaller range near the top of that larger orange range. As it can be noted the range was tight. I have provided two views. One min and 5 min charts. On the one min first trade took place on the 20th bar in the developing range hence I deemed it to be a range and not a PB. On the 5 min chart the frst trade took place in the 4th bar so it could have just been a bull flag. But after comparing the two I decided it was most likely going to be range behavior for a while at least so I decided to employ range trading tactics for a tight range. As mentioned in prev post on channels this range had a height of about 3.5 points. I need to try and extract 1 point profits as the the range has to be at least 3 times the height of my min scalp attempts which is 1 point in this case. The average size bar is more than 1 point on the 5 min chart so I am good on that. On the 1 min about a point maybe a little less but I at least want to see the 5 min average bar size be bigger than the min scalp. The tactic is short at the top cover as it trades down towards the middle. Go long at the bottom and exit as it trades up towards the middle of the range. Average in to losing original entry IF the OPPORTUNITY presents itself. I normally would add in 1 point increments. Tried to but not got filled. Too bad I like averaging down. I make more money! Short entries are made ONLY with limit orders at the top of prev bars ...flags..DT..or other type pauses. Long entries limit orders only at the bottom of flag..prev bars..DB or other type pauses. Stop loss on both long and short is outside the top or bottom of the range. Most of the time 2 points above or below but on some maybe a point. Puke area is SL or consecutive bull bars with gaps between the close bar and the close of the prev two or 3 bars, whichever comes first. The dotted lines connect the entries and exits. All trade done with 1 contract each time. The gross profit 462.50. Net would have been 416.78 after comm. Not too shabby for less than 2 hours work trading one contract at a lick. Anyway this is how I try to extract profits out of a tight range when the context is correct. It does take some nerve because the natural tendency is to do the opposite. Go long on what looks like a good move near top and short what looks like a good move near bottom. But the oods fight against such a thing as most BO's in ranges top or bottom fail! I will also average down in such senarios. Anybody want to code this up and run it on auto? Please make haste and do it. The faster the better. It will just make things more accurate for me as more and more traders do it. And make my win ratio higher although I have yet to figure out how to get it higher than 100%! ROFLMAO Good luck.