Averaging down on Dax and FTSE....

[jungerns]

Would be interested in other traders view on averaging down on occasions......I for one actively do it where I think its appropriate.

Unless you keep trade details (which I dont but should !) I'm never completely sure if its adventageous ?? In my opinion it is.

Whats the general concensus on using this tactic ??

 

[anley]

Averaging down works most of the time, but the time it doesn't the losses take ALL the past profits and ALL the future ones as well.

Some advice: successful investing and trading is ALL ABOUT risk first and potential reward second. Average downers only ever think of potential profits never potential risks.

Your best bet is taking the initial loss where you were supposed to take it (assuming you actually thought about the chance of loss before you put the position on). Then re-evaluate the market and re-enter if need be. Good luck.

 

[gle101]

Would be interested in other traders view on averaging down on occasions......I for one actively do it where I think its appropriate.

Unless you keep trade details (which I dont but should !) I'm never completely sure if its adventageous ?? In my opinion it is.

Whats the general concensus on using this tactic ??

Yes average down is not a good idea. It will eventually lead to frustration and ruin. Instead take control over you trading, learn about Risk & Money Management, it will save you a lot of pain and money.

____________
"Take control with Risk & Money Management"
http://www.trade2win.com/boards/pla...140296-visualrmm-interactive-new-concept.html

 

[advfntrader]

depends on how much money you have. if you keep positions small relative to your pot then in theory you will always be able to get yourself out of trouble. don't let your usable margin get too low

 

[advfntrader]

eg. £10k pot and trading FTSE at say £1pp....it would need to go thousands of points offside to wipe you out which ain't going to happen. but on Oil, gold etc. you better be more careful....

 

[gle101]

The problem is, average down is associated with revenge trading. I do not recommend this in any form as, it is very hard mentally to keep this within a predefine limit.

____________
"Take control with Risk & Money Management"
http://www.trade2win.com/boards/pla...140296-visualrmm-interactive-new-concept.html

 

[Ross Spur]

Averaging down is potentially ruinous, but as advfntrader says, it does nearly always work if you have plenty of margin. Try trading a 10k demo account with super-wide stops for a few months for proof!

 

[Hoggums]

The problem with averaging down is that when it doesn't work - that's all your money lost.

So you could be successful for 3 years averaging down, but it only takes once when you run out of margin and all that effort will have been totally wasted as you get margin called.

Simply not worth it - because in the end you'll lose your money, it's inevitable.

 

[jungerns]

eg. £10k pot and trading FTSE at say £1pp....it would need to go thousands of points offside to wipe you out which ain't going to happen. but on Oil, gold etc. you better be more careful....

This is extremely close to reality except I normally open at 2 per pip.

I stick strictly to Indicies..

 

[jungerns]

Averaging down is potentially ruinous, but as advfntrader says, it does nearly always work if you have plenty of margin. Try trading a 10k demo account with super-wide stops for a few months for proof!

Just to clarify what you're saying. Assuming a 10k plus pot.

If you opened a pound a point trade on the FTSE with a 1000 point stop (for example) then you'd be hard pressed to be wiped out by doubling up when required ??

 

[ZEN archer]

Would be interested in other traders view on averaging down on occasions......I for one actively do it where I think its appropriate.

Unless you keep trade details (which I dont but should !) I'm never completely sure if its adventageous ?? In my opinion it is.

Whats the general concensus on using this tactic ??

Hi Jungerns.

To successfully average into the position at better rates you have to be a very disciplined trader with a clear idea about the ultimate exit point/ amount at risk.

 

[anley]

One important point many new traders need to think hard about and realise is this -

ONE TRADE SHOULD NEVER MATTER.

So if you buy the FTSE today or short Gold whether both lose, both make money, or 1 wins and the other loses the P&L shoulnd't really matter. It's a long series of trades over the year where the real money is made and lost.

In regards to doubling down a losing trade, why do this if one trade never matters? Better to take your loss (which you should have agreed before putting on the trade, otherwise how else are you going to trade the correct size), and move on to the next trade.

Something to think about anyway.

 

[tar]

Would be interested in other traders view on averaging down on occasions......I for one actively do it where I think its appropriate.

Unless you keep trade details (which I dont but should !) I'm never completely sure if its adventageous ?? In my opinion it is.

Whats the general concensus on using this tactic ??

It is not about if you average down or not , it is about how much you risk in every trade , so lets say you don't average down but you risk 10% in every trade then you are n trouble , but if you average down x times risking a max of 2% of your capital in all your positions then you are not in trouble , in fact i believe scaling in ( average down ) with a small size and with a stop loss in place is much better than trading one position with an arbitrary stop ( fixed stop of 20 points for example ) , but yes don't average down for ever hoping for prices to come back , make a plan and stick to it ...