I agree that averaging down is an element of potential danger and I dont' average down, but I try to be a bit open minded, so I am not certain that every trader that averages down is a gambler doomed to blow.
My dear hefoba, your view is not your view.
It is the view of millions and millions of traders.
Probably 99%. All those who think they finally can average down safety...
Until the wrong serie comes, then they can not manage the DD.
We know that, we were like that, we don't even want to speak about that anymore
Discuss about that is really losing time...
We must become a "law of series" expert to manage a DD.
And what is the most funny and paradoxical, it's that the "law of series" experts are gamblers.
But not Gamblers as we think. They are called : Advantage Players.
Advantage Players are the only 0.1% of the Gamblers.
Those who win.
Always the same rate... like in trading, it's the same.
So, first, i would say that we must learn all about this branch of the theory of the games.
Yes! To manage a DD, learn all what is possible to learn about : "the law of the series".
EDIT : Especially about the speed of the occurrences.
You will all thank me later.
Have a nice evening
Not really, you can speak... but to ask to those who have a better Ra, Rs or La to help you.
Not to speak like you know things in trading.
Because if you knew things, you wouldn't have that Rs or La... and you would find something more original to do than the same of the 99.9% of the traders.
By the way, i've read 200 books about trading.
Almost all bullshits.
Probably only 10 was needed to increase the trading knowledge.
Now, I don't read anything because of that.
I'm more at the point to write my own book than to read others...
OK, if we want to look at this from a more nuanced point of view, IMO there is a difference between grid trading and averaging into a position.
If you have a mean-reverting strategy that enters short on overbought levels and vice versa. It can be efficient to average into your position under certain circumstances as sometimes the exaggeration continues even further than you (or your algorithm) predicted.
Correctly averaging into a position is rather difficult because it's a thin line between a smart average down and stupid grid trading or "getting married" to your position.