You're all assuming this is a mechanical system. I just put the worst case scenario to show that it works in the worst case scenario. Obviously I'm not going to be buying at the top and averaging down from there. There is some skill still involved in TA. Typically I'll start buying when everyone else is crying. We kind of steered off topic. All I'm saying is that using stops is essentially gambling because you are hoping you are right no different than picking a number in roulette. With averaging down I don't care if I'm right ..if I'm wrong I can accumulate more shares and increase future profits. Ask yourself if you would put your house up for sale just because it drops $1500 in price? What if you could actually place stops on your house where if price hits that level your house would be sold off? How many of you would use stops then? Stocks are no different.
I think I understand what you are doing now. So, if I understand correctly, you time your moment when to average down? That is a great. But we do not see a lot of those moments. For example, what do you do when the market is moving up? Do you have then missed opportunities because you are waiting with capital for the moment you can start averaging down? Did you calculate missing returns of 'waiting' for corrections or even bearmarkets? Also do you use an allocation calculation of your capital to deploy on several levels? For example 25% from top, put % of capital in the markets, 50% from top, put % of capital in the market. How do you know if you are fully invested at the bottom? What if you find out if you are fully invested and the underlying keeps getting lower? Do you borrow money then to average down?
This is why I like to read your posts. If I were OP, I take it to heart and do my backtest to prove you right or wrong. The reality is you can make money or lose money using every tricks in the book. The devil is in the details. The thesis I stated in my post, I realized them early in my journey and actually is a part of my investment model. Easy to backtest.
Sir, what you are saying is your chance of a fatal accident driving your Lambo is 1 out of 1 million, you better don't drive.
Averaging down blindly, you are adding to a losing position which is guaranteed to increase those losses you have already. Do not see how that is a viable strategy at all for the original poster. Nobody knows where the bottom is on a stock on a downtrend. Enron went from $100 all the way to $0.50. There was an Enron employee who kept buying Enron shares as it tanked, averaging down. He lost everything. Ken Lay and Jeff Skilling sold their shares near the top but, kept telling people Enron is an awesome stock and to keep buying while, they were dumping their own shares.
You guys, this is hard for me to explain because you all don't understand the intricitities of EW. I have had to dumb it down to basic C&H. I don't see the market in trends, I see it in motive waves, and corrective waves. Every ABC/WXY correction has fib levels which are used in picking entry points. It really doesn't matter if in an uptrend or a downtrend. Here is a great resource: https://elliottwave-forecast.com/elliott-wave-theory/ Once you grasp EW you will realize how support and resistance levels don't exist, only fib levels. You will understand why some H&S work and others don't. You will understand triangles and cyphers. You will realize what is really happening with "order blocks" which are just an ABC or WXY, not price coming back arbitrarily to a liquidity zone. They come up with observational rules like such as once mitigated the block is done lol. It's akin to the earth sits on a turtles back. Here is an example: P.S this is also an example of the determinism of the market. The 3rd wave has aligned with the election year which facilitates the third wave because the market/economy gets propped up during election years. Technically the 3rd wave is a self fulfilling prophecy...this time it happened to be forecasting an event (the election), other times it will forecast earnings or news that will facilitate it completing its cycle.
Here is $SPX daily chart from back in 2022. From Jan 2nd high to Oct 13 low it lost -27.54%, try trading it with no stops without "chitting the bed":-