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

I used to think averaging is for losers indeed and was not open to the idea it could be successful - however, later i realized, this would come from trading on smaller tf's/scalping and was not considered a part of my strategy.

I think everyone can agree that averaging in can be part of a (n investment) strategy / risk management / money management. It can be a part of your (strategy) puzzle. So indeed - if im convinced I bought something at the right price and it goes lower - why not buy it again on the "bargain" price if your (strategy) view remains the same.

Correct me if im wrong, but it seems normal to do this in the equity markets if you bought stock from a certain company and you still have a strong believe the buy was correct.

Excellent point.

it works fine until it does n't, and then usually always goes horribly wrong
if a strict stop method was always used (theoretically) there should n't be a catastrophe
but if a strict stop method is n't used, traders will blow there accounts

and as someone mentioned a bit further back its for those with crap entrys
get your entry's nr correct and no averaging down is necessary anyway
concentrate on the higher probability trades, forget the others, however tempting
and forget averaging down

Pick the correct long term trend, and go in with small enough sizes and just about anything will work. Averaging up is better though. when the trace show that it is coming back to your position, Then add in. You really have two independent trades going in the direction of the long term trend.

Pick the correct long term trend.

look over all the possible trades. Is this the best place to put your money? Is there a better?

Great discussion, averaging in/down are both great tools for portfolio traders/investors. The key to success with this method is in the design and maintainence of a portfolio, But, If you are not a portfolio investor, averaging down is a recipie for disaster and should be avoided.

Averaging down is for losers: absolutely true
Averaging up is a waste of effort and buying high / selling low is for losers.

It's better to "test" with a single entry.

Averaging Down

The essence of this is a successful technique used by all the major mutual funds as a recommendation to their clients for as long as they have existed. They term it "Dollar Cost Averaging." It works.

On another note, but related, we cannot intelligently classify a trade where price has moved against us as a "losing" trade, or that a trader that takes advantage of the situation by adding to the trade as a "loser." The fact is that the market makers intentionally move price opposite the trade in order to Stop Hunt the right side positions. It is how the market makers create liquidity for themselves to get more positions into the trade! If they are adding, we should be adding. The key is to know the different between a Stop Hunt, and a reversal. That is not so easy, but an intelligent trader has a better chance of seeing PA correctly than a trader whose mindset is locked into all the quaint phrases and advice so predominate in the market, that are really designed to help traders lose their money.

-tah

Its pretty simple isn't it? You risk what you can afford to lose, whatever way you choose. Otherwise sooner or later you will lose more than you can afford to lose