Averaging down..................

[Chartsy]

a lot of good daytraders average down, though i imagine it'd be hard, but can still be done.

 

[tommason]

Thank you Chartsy.
the bigger account u have the easier it is actually.
avg down not can only be used to make money but to get out of losing position actually.

a lot of good daytraders average down, though i imagine it'd be hard, but can still be done.

 

[Shakone]

I am different .I see it more on the dollar side not the %.
and it is totally discretionary. no calculated method also it depend on time as well.
most people just look at the % without looking at the time.
have you ever regret b/c price bounce back ? and u think if I just wait, I could get breakeven or slight profit.
its based on the idea, the longer time u have the more probability that price will go back in the high probability filled area. the lesser the time u have the lower chance u will get filled.

the key to my trading is to identify this high probability area

tom, I mean ballpark. Doesn't have to be exact. Are we talking around 2-3% initially, or are we talking about 5%? When you have averaged down to the max, are we talking about 5-6% or about 15-20%. Give me some idea what you're risking. If you absolutely have to do it in terms of dollar amount, tell m e how much you risk in dollars relative to your account size, and I'll work it out for myself.

 

[Shakone]

Thank you Chartsy.
the bigger account u have the easier it is actually.
avg down not can only be used to make money but to get out of losing position actually.

No it can't. Averaging down, can get you another trade which lowers your average price so that overall you don't lose. But it didn't stop the initial loser from being a loser. That was still a loser.

 

[luckyd1976]

Im reading an interesting book right now by Robert Wiest "You can't lose trading commodities" c1980

Book's thesis
Scale Trading down and since its on commodities Supply/Demand dictate and the price will never go to ZERO (unlike Stocks) So with proper risk scales one will never lose.

 

[Shakone]

IS that then buy and hold lucky?

 

[Chartsy]

No it can't. Averaging down, can get you another trade which lowers your average price so that overall you don't lose. But it didn't stop the initial loser from being a loser. That was still a loser.

That all depends on what you consider to be 'wrong'. you can be 'wrong' over the short term direction but correct on the long term direction. You may end up with a lot of small 'wrongs' and when you scale in and out and average down chances are your win % in going to be low, 20-30%. But IMO that is irrelevant, pip/ticks/points are irrelevant. You can lose pips on a day but still make money!

 

[oildaytrader]

No it can't. Averaging down, can get you another trade which lowers your average price so that overall you don't lose. But it didn't stop the initial loser from being a loser. That was still a loser.

It all depends on how cleverly averaging down is used and by whom, A great trader will average down to perfection and make profits, an average trader will average down on the wrong setups, randomly , clumsily and poorly.A good trader will time the averaging down perfectly, and take a calculated risks.



O D T

 

[tommason]

if you cant dont force it.
but, I know i can & I have a proof in all my broker statement posted in my thread
u can see that in the quantity section.
ill reply ur other post after my class

No it can't. Averaging down, can get you another trade which lowers your average price so that overall you don't lose. But it didn't stop the initial loser from being a loser. That was still a loser.

 

[luckyd1976]

IS that then buy and hold lucky?

Most Averaging is...

Sry I havent read all the earlier posts, but which averaging are are we talking about

a pure DCA(ing), Value Averaging (down Prices only), or LTerm Pivots (incremental selling), etc???

They all have some form of Buy and hold to some extent. Hence the averaging.

Deep enough pockets/Smart Enough Scales/Rebalancing etc... each one of these strategies have been around forever. So do they work, I think so. Do I use them nope.

I knew of a trader that never purchased more than $500. worth of his first pick. And every -10% down the stock went he would Value Average down unto a max of 16k per position -50%. It worked for him, I dont have the stomach for that though. For me it would be like I was wrong, time to move on. But hey thats the beauty of the markets there's room for everyone.

 

[Shakone]

Just to make it clear, I am judging each trade on its own merits. If you make another trade which overall gives you a profit despite the first losing trade, then welcome to the club. THat's what traders do. That does not mean the initial trade was a winner, it doesn't mean that my second trade turned it into a winner, it means that my trading as a whole made up for my losers.

Tom still waiting on the %'s you are risking

 

[Chartsy]

Just to make it clear, I am judging each trade on its own merits. If you make another trade which overall gives you a profit despite the first losing trade, then welcome to the club. THat's what traders do. That does not mean the initial trade was a winner, it doesn't mean that my second trade turned it into a winner, it means that my trading as a whole made up for my losers.

Tom still waiting on the %'s you are risking

yes but i don't look at individual trades and say ' i was wrong' on this one, but this one did well, i look at the whole bunch of them, the situation, and if my stop gets hit i'm wrong.

 

[tommason]

Shakone you can judge whatever u want. but each trader judge the way they want. it doesnt mean the way other ppl think has to be the same as urs.
I dont judge every trade on its each execution, trading is not as simple as that. I judge differently than yours and i make lots of money. if u dont agree its fine, but its working w/me Furthermore, I share with empirical evidence (my personal broker statement). that's what counts.

 

[tommason]

it depend on lots of factor when I avg down (such as the time left,volatility, liquidity, candlestick pattern, my support/resistance, how far price has stretched).
I try not to do that like couple minutes or last hours before market close.
so the earlier I do that , the higher chance that I would get filled.

I didnt really look at % to be honest. I do look at the real dollar itself & then I need to know how much more buying power left before I keep adding position.

for example for mini contract I have 27 contract maximum buying power, then i would try to scale it little by little so it would not go above 20 that often. u know because when u have drawdown u also reduce ur max buying power.but this is just example in reality it could be more than that.
again i use avg down more when im wrong or when market pullback slightly.
u know sometimes price flirt a little bit to the opposite side of ur direction. so if i want to get better entry , I avg down to reduce my risk.

I just try to not go all in with ur buying power at once. I would have been screwed if i do too much.

so to answer ur question, it is depending on your buying power when u avg down.

im just so good at it.

tom, I mean ballpark. Doesn't have to be exact. Are we talking around 2-3% initially, or are we talking about 5%? When you have averaged down to the max, are we talking about 5-6% or about 15-20%. Give me some idea what you're risking. If you absolutely have to do it in terms of dollar amount, tell m e how much you risk in dollars relative to your account size, and I'll work it out for myself.

 

[tommason]

hey the thread title is averaging down so im a good example of that since im succesful using it and i backed it up with my broker statement.

Tom,

I think you have given yourself quite a few hostages to fortune back there in some of your comments. I hope for your sake the eventually demanded ransom is not too high!


Good luck anyway, and never stop learning.

Cheers,
Mike

 

[tommason]

i do the regular avg down to get better entry so i will reduce my risk and to get out of losing position.
however im not as deep pocketed as ur friend. thats why i close all my position before market closed. im not holding long term at all. I'm pure daytrader.

Most Averaging is...

Sry I havent read all the earlier posts, but which averaging are are we talking about

a pure DCA(ing), Value Averaging (down Prices only), or LTerm Pivots (incremental selling), etc???

They all have some form of Buy and hold to some extent. Hence the averaging.

Deep enough pockets/Smart Enough Scales/Rebalancing etc... each one of these strategies have been around forever. So do they work, I think so. Do I use them nope.

I knew of a trader that never purchased more than $500. worth of his first pick. And every -10% down the stock went he would Value Average down unto a max of 16k per position -50%. It worked for him, I dont have the stomach for that though. For me it would be like I was wrong, time to move on. But hey thats the beauty of the markets there's room for everyone.

 

[tommason]

just to clarify.
I'm not warren buffet but i do avg down on v short term strategy (daytrading).
and I backed it up with my broker statement.

Averaging down is a long-term strategy (Warren Buffett type!) and not advisable for Trading in futures, options, currencies.

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