{quote} My approach is basically this: identify a stable trend and try to hitch a ride with it. If that fails, hedge. I think this may give you some ideas on how to keep hedging simple and avoid being caught on the wrong side of the market, at least most of the time. identify a stable trend: Every trend has four stages - 1 the end of the previous trend 2 the breakout / beginning of the new trend 3 the trend 4 the decline of trend {image} Of the four stages, only 3 is safe to enter. 1,2 and 4 are best avoided entirely. This is a structural perspective...
You determine that price is going up, so you enter a trade (total position is 0.05).
Price turns against but it's still up, so you average in (total position is 0.10).
Trend is still healthy, so you add another one (total position 0.15).
Now, if price happened to turn against when you have this stacked position, do you enter a 'heavier' hedge? Or do not let it go into the negative and just exit sooner with a bit less profit or breakeven?
This question is a bit related to what 5400 said "If it's dangerous to average down, then it must be safe to average up.", so maybe there's something to consider when the trade is stacked and positive
