LTCM , Quants and averaging

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Pure Pip Producer

Well-known member
490 254
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.
Of course, grid is worse than the simple averaging down.
But averaging down that means that someone can pyramid in the other side of you.
So, the best thing you must do is to exit and jump to the other temporal serie.
But for that, you must be aware of the temporal series.
Those of the arborescence (tree structure) of the possibles.
Those you would have written before...
Written on the right side of the screen...
A really different way to think the Trading.
And different way to think the Future.
 

hefoba

Member
94 74
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.

One free game and one expensive book by Van Tharp talks about position sizing. https://www.trade2win.com/threads/book-position-sizing-trading-simulation-game.238510/ Have you test the game ?
 
 
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