Averaging when already In the RED.... | Page 3 | Forex Factory

Options

Go to
Permalinks
Print Thread

Similar Threads

Averaging Up your winning trade ? 11 replies

'Averaging Down Is for Losers' - valid or not? 27 replies

Fast Averaging versus Slow Averaging 1 reply

Averaging 7 replies

Martigale and Averaging Down 4 replies

Attachments: Averaging when already In the RED....
Exit Attachments

Averaging when already In the RED....

  • #41
  • Apr 27, 2009 9:55am Apr 27, 2009 9:55am
CateFul,

Simply,what dt is saying is that just because your losing doesn't mean you've lost(you only lose when your stopped out).Therefore,if you haven't lost,placing another position is only giving you an average position closer to current prices and therefore beneficial,provided that it doesn't exceed your maximum risk.

If your total risk is 2% and your stop on your first position is 2%,then you have no business buying/selling in again.
You must break your position up in order to operate this way.
I do this quite regularly and it works well.
dt,if i have misunderstood let me know and all apologies if i have.
I wouldn't want to confuse things,trading is confusing enough as it is.LOL.


Cheers
sk
  • #42
  • Apr 27, 2009 10:40am Apr 27, 2009 10:40am
Quoting skfx
CateFul,

Simply,what dt is saying is that just because your losing doesn't mean you've lost(you only lose when your stopped out).Therefore,if you haven't lost,placing another position is only giving you an average position closer to current prices and therefore beneficial,provided that it doesn't exceed your maximum risk.

If your total risk is 2% and your stop on your first position is 2%,then you have no business buying/selling in again.
You must break your position up in order to operate this way.
I do this quite regularly and it works...
Yes, all-in-all what you are saying reflects my main point.

I would add though that even if you do that 'breaking-up' of a total intended position into smaller increments in order to average, there is still a matter of timing involved. That is the difficult part in knowing when you are flogging a dead horse vs. building a highly profitable position - which is more a matter of each traders individual trading method. Not all methods require averaging to be profitable of course and ultimately that is the reason imo for the occurrence of the saying 'losers average losers'.

In trading models where you have fixed position sizes and fixed stops it would of course be a matter of violating those rules, should the trader keep a fixed position beyond a fixed stop in order to try and average the trade out - and consequently running the risk of losing more than allowed by the system or losing more than originally calculated.

It is all about the definition of a 'loser'.

regards
daytrading
Enter Signature
  • #43
  • Edited 11:04am Apr 27, 2009 10:53am | Edited 11:04am
averaging works... only if do a well informed investment and using no leverage.

meaning
'when price drops, you can acquire the golden property at more favor price' (buffet)

well informed and no leverage is key to this 'averaging', also need to enter next position at a major level like day TF m-m level,
make sure the averaging is significant enough compared with market movements

still amount of position to expose in a single pair is to be well controled, prefer <10% of total equities assuming no leverage. (turtles)...
putting all one's money or even more in a single bet is nothing but suicide.

in short term trading of no meaning pair, too freq use of averaging is easily run into over leverage
(for example, 10x 1st position, 10x when in red, another 10x twice and you can only tolerate 2.5% market move)
... (then plus no stop/loss habit) will blow up easily.

do a hedging on a pair that reversely correlate with this one could help, this not necessarily locks the loss.
if you really believe waiting long enough time, your target could be hit after a market correction,
do a hedge on another pair reversely makes much relief coz you no longer see loss grow with price moves.

Quoting Leonlorenzo
Hi Guys,

Im starting this thread as a disscusion on whats refered to as 'Averaging down' (I think). I understand that this Is often looked down on as a bad move, but with the coming of FTI there seems to be quite afew practising it and I also have suspicions that some senior members also Emlploy It in to their trading plans.

I averaged down In my method that I tested In the Journal section of this site, and although I did very well became bored with testing It that way so have since tested It on a forex simulator and have been experiencing similar...
  • #44
  • Apr 27, 2009 2:01pm Apr 27, 2009 2:01pm
Quoting daytrading
His buy orders were at different levels - some above, some below his first buy....but all above a level he would definitely get out (should it go that low).
But, not a contradiction with the sign on the wall. Really great example and explanation. Helps to understand the difference between scaled trading and averaging losers. Pretty clear that he put the sign up as a reminder to himself to make sure he was clear about which side of the fence he was on.
  • #45
  • Edited 3:36pm Apr 27, 2009 2:55pm | Edited 3:36pm
Quoting daytrading

To prove my point, here is a quote from Paul Tudor Jones' interview with Jack Schwager in the Market Wizards book. Page 123: "....and I was buying it every time it came down to the low end of that range."
Didn't he end up losing a lot more than he would on that trade? He wasn't "scaling in", his pos just got bigger in a ranging market to compensate the lower vol. He bought more than he wanted to carry.

You guys are pretty aggressive here lol. Scale in is fine, heck I scale in too. But doubling up on a losing trade is the worst thing you could do.

Everybody's got their own modus operandi. Simply your template is different than mine doesn't make yours wrong and mine right, nor the other way around. A level is a level is a level. It doesn't matter how you get in at that level. You may decide to put on half at 5050 and another half at 4950 to get an average of 5000. I may put on half at 5050, cut it out at 4950. Put it back on at 5000, and add all the way up. That guy across the room may put on a full pos at 5000. Same tickets.

Good trading.
Take a report.
  • #46
  • Apr 27, 2009 3:49pm Apr 27, 2009 3:49pm
Hi,

no offence intended - as long as we talking the same thing for the learners.

good trading to you too.

regards,
daytrading
Enter Signature
  • #47
  • Apr 28, 2009 3:39am Apr 28, 2009 3:39am
Quote
difficult part in knowing when you are flogging a dead horse vs. building a highly profitable position

Absolutely dt.


Quote
Everybody's got their own modus operandi. Simply your template is different than mine doesn't make yours wrong and mine right, nor the other way around.

Provided your method makes money overall CateFul,it doesnt matter how you skin your cat.Couldn't agree more.
  • #48
  • Apr 28, 2009 4:11am Apr 28, 2009 4:11am
Buy more when you are on the right side of the market and winning. Go with a trend NEVER against it. Simple...
  • #49
  • Apr 28, 2009 9:09am Apr 28, 2009 9:09am
This weeks scale-in trade.

Possibly room up to 97.50 initially.

regards
daytrading
Attached Image (click to enlarge)
Click to Enlarge Name: usdjpy scale in.gif Size: 23 KB
Enter Signature
  • #50
  • Apr 28, 2009 9:33am Apr 28, 2009 9:33am
I got long at 95.85, Placed the pending order yesterday evening. There was alot of fuss about Strikes and stops and Interest around the area.

DT, if its not too much trouble could you take a look at this post and the ones after It. I thought I knew all this a while ago but maby not....

http://www.forexfactory.com/showpost...71&postcount=9
Living the adventure in my head.
  • #51
  • Apr 28, 2009 9:44am Apr 28, 2009 9:44am
Quoting Leonlorenzo
I got long at 95.85, Placed the pending order yesterday evening. There was alot of fuss about Strikes and stops and Interest around the area.

DT, if its not too much trouble could you take a look at this post and the ones after It. I thought I knew all this a while ago but maby not....

http://www.forexfactory.com/showpost...71&postcount=9

Hi Leon,

What precisely would you like to know?

regards
daytrading
Enter Signature
  • #52
  • Edited 10:15am Apr 28, 2009 9:54am | Edited 10:15am
Quoting daytrading
Hi Leon,

What precisely would you like to know?

regards
daytrading
To put it simply, Can price change without a trade happening?

Edit: Keep in mind that a trade is made at a price before It becomes the price.

EDIT2: To anyone who answers, can you explain why and how.
Living the adventure in my head.
  • #53
  • Apr 28, 2009 10:12am Apr 28, 2009 10:12am
Quoting Leonlorenzo
To put it simply, Can price change without a trade happening?
Oh yeah sure, happens all the time during data prints or in a "fast market".
Take a report.
  • #54
  • Apr 28, 2009 10:19am Apr 28, 2009 10:19am
Quoting Leonlorenzo
To put it simply, Can price move without a trade happening?

That depends on what is your definition of a 'price move'.

Theoretically the answer is yes. It is best explained with an illustration of an illiquid instrument. Take any illiquid stock for example. The price you get quoted by a broker entirely depends on where the current bid(s) and offer(s) are.

So, let's say there is one bid at $5.00 and one offer at $5.50 - and we assume that both sides are for 1000 shares of that stock. Your quote for 1000 shares would be $5.00 to $5.50. Now a third party joins in and places a bid at $5.25 and your subsequent new price is $5.25 to $5.50.

Technically, not only the spread has changed (narrowed) without a trade having gone through, the price has changed as well - hence the new quote. If the offer now decides to up the level to $5.75, you get the old spread of $0.50 quoted again but with a new price of $5.25 to $5.75.

You might want to look at it from a charting perspective (which in history came later than market prices), and the confusion arises in my opinion because certain charts update on the basis of 'last trade' which means without an actual trade going through (like on a tick chart), you would not notice a real change in price until the next real transaction or request for a new quote.

In an instrument as liquid as FX (actually the most liquid instrument on the planet), the time intervalls are usually too small to discern a price movement without a trade having taken place. This liquidity provides seamless graphs without (many) gaps caused by price movements without trades inbetween.

regards
daytrading
Enter Signature
  • #55
  • Apr 28, 2009 11:44am Apr 28, 2009 11:44am
Quoting daytrading
That depends on what is your definition of a 'price move'.

Theoretically the answer is yes. It is best explained with an illustration of an illiquid instrument. Take any illiquid stock for example. The price you get quoted by a broker entirely depends on where the current bid(s) and offer(s) are.

So, let's say there is one bid at $5.00 and one offer at $5.50 - and we assume that both sides are for 1000 shares of that stock. Your quote for 1000 shares would be $5.00 to $5.50. Now a third party joins in and places a bid at $5.25 and your subsequent...
Hmmm, when I add spread to the equation I get confused.

So, could it be said that:

'Price only changes when a trade is made, unless someone makes a bid/offer Inside the spread'.......?

My head it hurting.
Living the adventure in my head.
  • #56
  • Apr 28, 2009 12:13pm Apr 28, 2009 12:13pm
Quoting Leonlorenzo
Hmmm, when I add spread to the equation I get confused.

So, could it be said that:

'Price only changes when a trade is made, unless someone makes a bid/offer Inside the spread'.......?

My head it hurting.
Doing so {& getting Filled} would Move the Price.
  • #57
  • Apr 28, 2009 12:16pm Apr 28, 2009 12:16pm
Quoting Bemac
Doing so {& getting Filled} would Move the Price.
Thats what I was originaly saying, but then.... Im getting more confused.

Getting filled = A trade was made
Living the adventure in my head.
  • #58
  • Apr 28, 2009 12:18pm Apr 28, 2009 12:18pm
No, Leon -

Price changes only when current bid's and offer's change (and one way of this happening is for example that a bid is now willing to pay the offered price).

The market can trade multiple times at the same price, e.g. if there is a large offer that can absorb many small-sized bids at one price you won't see the price moving at all although maybe 50 trades have gone through.

Once the offer is exhausted at one level and bids are still coming in at that level, the next offer higher up will determine the price change.

regards
daytrading
Enter Signature
  • #59
  • Apr 28, 2009 12:23pm Apr 28, 2009 12:23pm
Quoting Leonlorenzo
Thats what I was originaly saying, but then.... Im getting more confused.

Getting filled = A trade was made
3 people:
# 1 Owns a Guitar.
#'s 2 & 3 want to Buy it.

#2. I'll give {Bid} $100.00
#3. I'll give {Bid} $110.00
#2. Hmph. $115.00
#3. $115.50

Price does not change Until #1 Says "Sold".
Bid/Ask Have been quite volitle though.
Why?
#4. Guitar for sale. $80.00.
  • #60
  • Apr 28, 2009 12:24pm Apr 28, 2009 12:24pm
No, Leon -

Price changes only when current bid's and offer's change (and one way of this happening is for example that a bid is now willing to pay the offered price).

when a trade is made?

The market can trade multiple times at the same price, e.g. if there is a large offer that can absorb many small-sized bids at one price you won't see the price moving at all although maybe 50 trades have gone through.

Im completely aware of this.

Once the offer is exhausted at one level and bids are still coming in at that level, the next offer higher up will determine the price change.

Yep

regards
daytrading

It feel like when It comes to this discussion we are all running round in circles and keep missing eachother.
Living the adventure in my head.
0 traders viewing now