Averaging down experience

[tech/a]

The expectancy comes out of one of the Stator stats pages...its an all time stat where the table above is this FY, i imagine my expectancy on closed trades for this FY would be a bit higher....just had a look and its $2.48

And i though it had been a bad year. :dunno:

Exactly
So what's right or are we just posting up stuff for effect.

 

[So_Cynical]

Exactly
So what's right or are we just posting up stuff for effect.

Exactly what?

My signature contains my all time closed trades stats and expectancy...eerrr just like it says?

Statistics: 82 Closed Trades since July 07, Winning Trades: 68, Losing Trades: 13, Expectancy/$1 Risked: $0.67

 

[Trembling Hand]

Statistics: 82 Closed Trades since July 07, Winning Trades: 68, Losing Trades: 13, Expectancy/$1 Risked: $0.67

So_Cynical are you thinking there will come a time where this strategy will start to turn negative?

 

[Mistagear]

LOL here's another one for ya...this one is closed trades this financial year.

Seriously i had no idea it looked this good...i dont click the closed trades tab to much.

I forgot to point out that the table in my above post is open trades all time...everything i have open, some big positions but most small as some profit has been taken on most of them so i can recycle my capital.
~

Cynical,
Thank you for sharing your results, as impressive as they may be, I
wonder if you would do me a favour.

Of the trades you listed in the above post.

If you averaged down any of those results, would you please calc the difference if you had
a) Sold the original position at say 5% loss instead of holding
b) Re-invested the full amount of proceeds from the first sale at the lower price, along with the subsequent second purchase (the average down ).

This should have you holding a greater number and at a lower average than you achieved by averaging down, and would show exponentially greater profits than were achieved.

I would be grateful if you could show the difference in the results here or I could compile if you prefer.
Thanks in advance.

 

[So_Cynical]

So_Cynical are you thinking there will come a time where this strategy will start to turn negative?

This year has been a bad year even if the results don't really show it..yoy i turned 2 or 3 times as many trades last year compared to this year...im stuck in 7 trades that have tied up a lot of capital but 5 of them are coming good now, close to break even or in small profit.

The system is working....and achieved a significant $ amount long term milestone on Friday so all 100% on long term target.

Cynical,
Thank you for sharing your results, as impressive as they may be, I
wonder if you would do me a favour.

Of the trades you listed in the above post.

If you averaged down any of those results, would you please calc the difference if you had
a) Sold the original position at say 5% loss instead of holding
b) Re-invested the full amount of proceeds from the first sale at the lower price, along with the subsequent second purchase (the average down ).

This should have you holding a greater number and at a lower average than you achieved by averaging down, and would show exponentially greater profits than were achieved.

I would be grateful if you could show the difference in the results here or I could compile if you prefer.
Thanks in advance.

Ok i know what your getting at and hard to argue against that...IF all my actions were done over and i had taken a 5% loss on my first parcel on all the trades that went against me id probably be 10 or 15% better off...maybe more.

And if i had planned my entry's better by staging my entry's (smaller first parcel) id be way ahead to...If i had held my IIN trade for just another 3 weeks i could of get 10% more.

And if i had sold my biggest loser (APN) at the bottom (Aug-Sept) and split that money between my 3 next biggest losers id be way ahead too..

And there's a 100 other what ifs...i call it as i see it, its a broad strategy that works and im very conscious of keeping it working, not being perfect...though of late ive been thinking that some sort a software alert system could help me be more disciplined.

After-all everything can be improved hey.

 

[skc]

LOL here's another one for ya...this one is closed trades this financial year.

Seriously i had no idea it looked this good...i dont click the closed trades tab to much.

I forgot to point out that the table in my above post is open trades all time...everything i have open, some big positions but most small as some profit has been taken on most of them so i can recycle my capital.
~

These percentages look pretty fantastic.

You said many times you like to recycle capital and establish free carry. And many examples you've provided show you establish your free carry at much smaller % profits.

Would I be correct in saying that the percentages represent the free carry portion?

E.g. Inital buy 10,000 units @ $1. Sold 9,000 @ $1.1. Remaining 1000 sold at $3.00.

Does the percentage in your table refers to +200% for the last sale, or ~30% for the average sale price?

 

[So_Cynical]

These percentages look pretty fantastic.

You said many times you like to recycle capital and establish free carry. And many examples you've provided show you establish your free carry at much smaller % profits.

Would I be correct in saying that the percentages represent the free carry portion?

E.g. Inital buy 10,000 units @ $1. Sold 9,000 @ $1.1. Remaining 1000 sold at $3.00.

Yep spot on...all the big spectacular winners are selling out of 3 positions, selling the free carry and usually a capital amount of roughly the same size, sometimes a bit more, sometimes a bit less.

The $ profit of the top 4 winners would average at a little over 2K...if i had held the original investment all the way thru, wow big money..but i simply didn't have the capital to do that.

Does the percentage in your table refers to +200% for the last sale, or ~30% for the average sale price?

Each entry is a parcel, a trade .. 8 stocks in total with the largest dollar amount belonging to the -64.24% loser : but not by much.

Funny hey cos the -64.24% loser and the 308.27% winner are actually the same sized parcels in the same stock

 

[Mistagear]

This year has been a bad year even if the results don't really show it..yoy i turned 2 or 3 times as many trades last year compared to this year...im stuck in 7 trades that have tied up a lot of capital but 5 of them are coming good now, close to break even or in small profit.

The system is working....and achieved a significant $ amount long term milestone on Friday so all 100% on long term target.



Ok i know what your getting at and hard to argue against that...IF all my actions were done over and i had taken a 5% loss on my first parcel on all the trades that went against me id probably be 10 or 15% better off...maybe more.

And if i had planned my entry's better by staging my entry's (smaller first parcel) id be way ahead to...If i had held my IIN trade for just another 3 weeks i could of get 10% more.

And if i had sold my biggest loser (APN) at the bottom (Aug-Sept) and split that money between my 3 next biggest losers id be way ahead too..

And there's a 100 other what ifs...i call it as i see it, its a broad strategy that works and im very conscious of keeping it working, not being perfect...though of late ive been thinking that some sort a software alert system could help me be more disciplined.

After-all everything can be improved hey.

I actually thought it would highlight the essence of the subject of whether to average down or not.
The trades done were your actual trades, the only difference would be to take a stop rather than hold as price declined.
The method of re-entering at a lower level rather than averaging down, I feel is a hugely better alternative.
Your impression that you may have been "10 or 15%" better off, is most likely well short of the actual difference between the two methods. Would have been a good opportunity to highlight how easily the outcome can be improved and how risk to capital can be severely reduced at same time.
Even if you decide not to post the result, I urge you to calculate the different result for your own benefit in future.

 

[burglar]

...
Even if you decide not to post the result, I urge you to calculate the different result for your own benefit in future.

I have tried to use averaging down and also this jumping out and back in.

I found averaging down to be slower, more deliberate, less stressful.
It appears to be reasonably profitable when the market is moving forcefully (as opposed to what it does currently)!

Agreed, the other way is more profitable, but hell ... it is hard on the nerves.

 

[skc]

Cynical,
Thank you for sharing your results, as impressive as they may be, I
wonder if you would do me a favour.

Of the trades you listed in the above post.

If you averaged down any of those results, would you please calc the difference if you had
a) Sold the original position at say 5% loss instead of holding
b) Re-invested the full amount of proceeds from the first sale at the lower price, along with the subsequent second purchase (the average down ).

This should have you holding a greater number and at a lower average than you achieved by averaging down, and would show exponentially greater profits than were achieved.

I would be grateful if you could show the difference in the results here or I could compile if you prefer.
Thanks in advance.

This exercise will only produce skewed results.

As So_C only averages down when the share price has fallen, the sample size will only include all stocks that offer him more attractive entry price down the track. You do that sum then of course he'd be better off.

What it won't capture is any share that he may have sold out (say for a 5% loss) but never quite fall further to trigger this theoretical re-entry. If the stock took off after his sale, then he's worse off.

So to assess the benefits or otherwise of your suggested strategy, he needs to do that for ALL his positions, not just the ones which he averaged down.

 

[Mistagear]

This exercise will only produce skewed results.

As So_C only averages down when the share price has fallen, the sample size will only include all stocks that offer him more attractive entry price down the track. You do that sum then of course he'd be better off.

What it won't capture is any share that he may have sold out (say for a 5% loss) but never quite fall further to trigger this theoretical re-entry. If the stock took off after his sale, then he's worse off.

So to assess the benefits or otherwise of your suggested strategy, he needs to do that for ALL his positions, not just the ones which he averaged down.

Totally fair comment


Burglar

I found averaging down to be slower, more deliberate, less stressful.

Everyone is different, I find the longer I remain on the wrong side of a trade, the more stressful it gets.
I prefer to be out of the market while while it goes against me. My usual method is to trail a contingent re-entry order, obviously it depends on individual circumstance, but my stops are breaks of support(imo) so if I remain keen to re-enter I leave the order in the market and move it closer to the action when I think price has found a new support.
Worse outcome is I pay a round trip brokerage and end up owning it again at a slightly higher price than if I had held on, however the method has potential to give a far superior profit that to average down
The absolute best part, it safeguards my capital from a prolonged trend against me, and usually allows me to concentrate on other opportunities instead of stressing over increasing losses

 

[Julia]

T
Worse outcome is I pay a round trip brokerage and end up owning it again at a slightly higher price than if I had held on, however the method has potential to give a far superior profit that to average down
The absolute best part, it safeguards my capital from a prolonged trend against me, and usually allows me to concentrate on other opportunities instead of stressing over increasing losses

Agree absolutely.

 

[burglar]

Totally fair comment


...

I owned an LH Torana with a 4 speed Aussie gearbox .... I rarely mist a gear.
It was retired at age 22 years due to rusted out quarter panels.

I hope this helps!

 

[So_Cynical]

This exercise will only produce skewed results.

As So_C only averages down when the share price has fallen, the sample size will only include all stocks that offer him more attractive entry price down the track. You do that sum then of course he'd be better off.

What it won't capture is any share that he may have sold out (say for a 5% loss) but never quite fall further to trigger this theoretical re-entry. If the stock took off after his sale, then he's worse off.

So to assess the benefits or otherwise of your suggested strategy, he needs to do that for ALL his positions, not just the ones which he averaged down.

^Agree^

My trades are to random to apply the level of discipline Mistagear his suggesting..when i have free capital its either enough for a large average down or re-entry, a new position (stock) or a small average down...usually i allow myself maybe 3 ot 6 days to do something, a re-entry gets first priority, an average down second priority and a new stock third...i try and take advantage of the biggest opportunity i see at that time.

Often a week later its a different opportunity i see that takes preference...that last average down in PTM was something i really really wanted to do, knew it could be the 1 trade that makes all the difference with that whole position...i short list then choose.

I don't have the discipline to Buy XYZ and take the loss 2 or 3 times while looking for bottom.

 

[burglar]

... burglar


Everyone is different, I find the longer I remain on the wrong side of a trade, the more stressful it gets. ...

I can stay on the wrong side of a trade forever. Here's why.

I can afford to lose all of my bet. If I couldn't afford it, I wouldn't bet it.
I write it off completely at the moment I place a buy order.

 

[Mistagear]

I owned an LH Torana with a 4 speed Aussie gearbox .... I rarely mist a gear.
It was retired at age 22 years due to rusted out quarter panels.

I hope this helps!

Everyone is different, I bought mine in 1979 just after it had won the Aust Touring Car Championship, I have often missed gears (My Nic" is fact not fiction)
It is not retired, continues to run in Historic races and has no rust in any panels.

I can afford to lose all of my bet. If I couldn't afford it, I wouldn't bet it.
I write it off completely at the moment I place a buy order.

Unlike my trades, each time I race am forced to risk losing all of my car, it may be written off completely.
Fortunately I can plan limited risk when I trade.

 

[waza1960]

I use averaging down in short term trading including automated strategies but I guess since this thread is in the Medium/Long Term Investing forum it may be better to discuss short term averaging down in a new thread...

 

[burglar]

Everyone is different, I bought mine in 1979 just after it had won the Aust Touring Car Championship, I have often missed gears (My Nic" is fact not fiction)
It is not retired, continues to run in Historic races and has no rust in any panels.



Unlike my trades, each time I race am forced to risk losing all of my car, it may be written off completely.
Fortunately I can plan limited risk when I trade.

I'm too old to race now, ...

Trading is all I do. I do it badly (methinks!)
But, win lose or draw, enjoy it immensely!

 

[GG999]

Something I don't understand about this

Supposing a long term investor spends days analyzing the fundamentals of a company and decides it's a great buy for a long-term hold at the current price. But just before buying a large batch of shares she remembers the accident last year that caused memory problems, and checks whether she already has a holding in the company.

And yes, she discovers that she already has a small holding, and unfortunately bought at a higher price. Because she thinks that averaging down is such a bad idea, she decides not to buy. And because she doesn't like to hold on to losing positions, she sells the original package.

How can a minor event a year or two ago that couldn't possibly have an effect on the future prospects of a company change someone's decision from buying shares in that company to selling its shares instead?

 

[jimmyizgod]

I wouldn't recommend trading with memory problems... the money she was going to spend on purchasing shares would probably be better off invested in private health insurance, and seeking out a specialist.