Why you should average up, NEVER down

Discussion in 'Risk Management' started by garfangle, Jul 9, 2010.

  1. ammo


    well put, you are covering and adjusting size and avg price ,at all times,up or down
    #41     Jul 18, 2010
  2. Buy into strength. Sell into weakness.

    I generally agree with this for the simple fact that averaging up is going with the trend while averaging down is going against the trend. The only valid method of averaging down IMO is scaling into small pullbacks of a strong trend, but a very clear and objective stop loss method should be followed when doing this. This method is also more about scaling in due to large size vs averaging down.
    #42     Jul 18, 2010
  3. There are may blow ups where people don't average down. Hence, if you are thinking of how you can blow up and thinking you are covered because some guru told you that all people that blow up average down you are wrong.
    #43     Jul 18, 2010
  4. bigb


    what about those that bought GM all the way down bc it would never go bankrupt?
    #44     Jul 21, 2010
  5. bigb


    if your blowing up without ever averaging into the position, then your initial position is way to large already.......or you are referring to longer term blowups where you really suck bad at trading and never win over and over until you reach 0
    #45     Jul 21, 2010
  6. Even the most basic of fundamental analysis would have told these people to stay away. If you can't read a balance sheet, you deserve to go broke.
    #46     Jul 21, 2010
  7. Yes, the people that never win.

    #47     Jul 22, 2010
  8. I never average down.

    I always add to positions once they are winning.... you can add as much as you want decrease the size or increase whatever your strategy tell you to do.

    Usually a good position is right almost straight away.. the ones which takes time to move in positive territory tend not to perform well.

    I am a trend follower.. I have around 42% hit ratio and I am happy with it.
    #48     Jul 23, 2010
  9. schulzey


    I'm a little late to this thread, but just to complicate things further would that make sense then to sell a percentage of your position on the way down to allow a breakeven or profit on a trade where you're losing?

    I always average up and I generally have a hard stop where I sell out right away if the trade goes against me. But it makes sense to me that you'd have more breakevens than losses this way yet the same amount of winners. It would take a little adjusting of the original position size to have the same risk.

    Obviously the strategy you employ is an important part for any averaging system to work. But if we're mostly in agreement on averaging up, scaling out on the way down makes sense as well.

    Just curious what you all think.
    #49     Nov 7, 2011
  10. this is the stupidest thread, i have read so far.

    why isnt it chit chat ?
    #50     Nov 7, 2011