Averaging Down for the win?

boofis · 27 July 2013

Re: Averaging Down for the win??

havaiana said:
That's where I'm at now, I find it harder to pyramid in than to average down meaning i have larger size on some of my worst trades and less size on my best ones.

I do however exit positions at loss if i think they won't come back, i don't try and turn every losing trade into a scratch.

I just try and do it on a bounce in my favour rather than just stop out at x ticks. The only time I hit a stop loss is my daily stop, or before a pre determined level where i think it could run as it is goes through, or before a news release

Two things: isn't that the exact opposite of what we actually want as traders? Full size on winners and less on losers (just in an ideal world scenario).
Also, you're pretty adverse to a stop, but not knowing what type of trading you do (assuming directional) isn't a stop in the most basic of senses just a point where the market has given you confirmation you're original trade idea was wrong, so why not choose levels rather than x ticks out of curiosity?
Have also toyed a few times with placing a double 'stop' one to stop out and one to enter when taking counter trend trades at very touch n go points where I am pretty certain alot of stops will be placed and has worked the couple times for a scalp when I've done it...but I guess that just means my original trade was **** cause my 'stop' was with all the retail stops.

Also, I'm in the same boat as Kid being new to the game, but my experience has been that i've put on trades and been stopped out to the tick where the trade idea was good and others where it was just plain wrong: both scenarios are very good learning outcomes for a newbie cause you get feedback on whether you entered too soon too late, or whether your trade idea was just rubbish and don't do that again. But without stop, the feedback as a newcomer would honestly just be hope in all situations which is :bad:

havaiana · 29 July 2013

Re: Averaging Down for the win??

boofis said:
Two things: isn't that the exact opposite of what we actually want as traders? Full size on winners and less on losers (just in an ideal world scenario).
Also, you're pretty adverse to a stop, but not knowing what type of trading you do (assuming directional) isn't a stop in the most basic of senses just a point where the market has given you confirmation you're original trade idea was wrong, so why not choose levels rather than x ticks out of curiosity? ...

Yep, i think i just need to average up more as well as averaging down to fix the size discrepancy between the winners and losers. The results have been and are consistently looking pretty good regardless.

I don't like to use levels for stops because I reckon they aren't static and I like to see how price reacts around them before know it's time to start looking for an exit at loss, add and scratch or add and hold. To me the only important thing about levels is the reaction as they approach or break them, if i'm stopping out at them i'm getting out before i know if the trade is good or not.

A couple of people mentioned i'm just trading volatility, i kind of disagree, i love big volatility and big moves. I'm effectively trading against the market moving in straight lines. Range or trend does not matter that much. If you start noting down when big extended one way moves with no bounces occur, most of them are usually predictable enough to avoid most of the time or only attempt to be on the right side of them. Also i'm not advocating risking your account averaging, i'm advocating decreasing postions size by a lot. When i inevitably hit a straight line type market and enter the wrong way i hit my daily stop, it's no big deal. People advocate risking 2% per trade, 2% is more than my max daily stop.

havaiana · 29 July 2013

Another thing, averaging creates many many more decisions. To a good trader making good decisions this will increase their edge in my opinion. Obviously to a crap trader it will increase the number of mistakes they make.

Can't remember the exact line but when i did the trial with propex i remember something along the lines of "stop loss orders are lazy"

Trembling Hand · 29 July 2013

havaiana said:
Can't remember the exact line but when i did the trial with propex i remember something along the lines of "stop loss orders are lazy"

They are for sooks.

sinner · 29 July 2013

Not all trading days/weeks/months are the same.

Don't mistake riding a current market regime for skill.

Switching strategies along with regime switches is necessary, understand that your drawdowns will be in these periods. If you only have one strategy then your equity has to be able to hold out until the market regime switches back to the one that pays you!

Obviously some markets are more "regime stable" than others, due to fundamental microstructures of the market. I would say stock indices have the highest regime stability, and FX the lowest.

skc · 29 July 2013

havaiana said:
Another thing, averaging creates many many more decisions. To a good trader making good decisions this will increase their edge in my opinion. Obviously to a crap trader it will increase the number of mistakes they make.

Can't remember the exact line but when i did the trial with propex i remember something along the lines of "stop loss orders are lazy"

The exact line...

I think reliance on stop orders makes one a lazy punter. That however, does not mean you should trade without a stop in mind.

http://www.propex.net.au/market-education/546-trainee-question-time-using-stops

havaiana · 30 July 2013

skc said:
The exact line...

http://www.propex.net.au/market-education/546-trainee-question-time-using-stops

Thanks for that. That one was after my time, found the one though:

http://www.propex.net.au/market-education/504-put-a-stop-to-stops

I should have made the distinction actually, although I'm implying i don't use stops, I have a stop entered via bracket order every trade i take. I just move it just far enough from the market that I can work my way out of the position instead of it being hit, but close enough that it is always less than my daily stop, usually much less. Rarely gets hit, only 3 times recently i can think of, twice when some unexpected jawboning went on and another time when i moved it too close to the market when i went to the loo.

Trembling Hand · 31 July 2013

havaiana said:
Rarely gets hit, only 3 times recently i can think of, twice when some unexpected jawboning went on and another time when i moved it too close to the market when i went to the loo.

Well yesterday I spent all of the arvo session in the Hurt locker!!!! Only getting back in the green in the last 30 min.

Was pretty sure the main action for the arvo was going to be up. What I wasn't smart enough to guess was the massive 100 point sweep 10 seconds after my first long entry!

Very uncomfortable day. Only reason I held onto the first entry was the exchange just crapped itself and I couldn't get out. So damage was done. Was a matter of sucking it up and getting on with the rest of the day.

Not the way I like to trade but the market rarely gives you what you want!

Though I have no idea how you would do that without a large backing.....

CanOz · 31 July 2013

TH, those arrows are your executions?

skc · 31 July 2013

havaiana said:
Rarely gets hit, only 3 times recently i can think of, twice when some unexpected jawboning went on and another time when i moved it too close to the market when i went to the loo.

Having a strong bladder is actually an important factor for being a good trader. I change my coffee habits just to make sure I don't have to go around open/close and critical news times (like 11:30am and 2:30pm).

I like this from Guy.

In trading you have to keep trying different things. For example when fading you can:

- Fade when momentum starts to drop.
- Fade when it looks like the dumbest thing to do.
- Average into trades rather than trade at one price.

http://www.propex.net.au/market-education/488-what-is-the-market-trying-to-do

CanOz · 31 July 2013

After looking at THs chart, i think a strong stomach is more important...

also, I'm guessing TH, your finding the ETH handy?

kid hustlr · 31 July 2013

How about the entry at the low in the afternoon.

propex quotes are making me laugh btw

Trembling Hand · 31 July 2013

CanOz said:
TH, those arrows are your executions?

yeah just estimates as I don't keep records on individual trades and don't get traditional statements...

CanOz said:
I'm guessing TH, your finding the ETH handy?

ETH - whats that?

skc said:
I like this from Guy.

Fade when it looks like the dumbest thing to do.

Click to expand...

- - - Updated - - -

kid hustlr said:
How about the entry at the low in the afternoon.

Freemasons code.

CanOz · 31 July 2013

Trembling Hand said:
ETH - whats that?

Extended Trading Hours

Trembling Hand · 31 July 2013

CanOz said:
Extended Trading Hours

You talking after hours? No haven't even looked at them. Hopefully never will. If you are talking about the longer Honkers day time. No not really. Feel like I work too much with 6 hours a day. :

artist · 31 July 2013

Trembling Hand said:
the exchange just crapped itself and I couldn't get out.

What does this mean? Communication was down? If so, how did all the ensuing trades take place? I don't understand why you couldn't get out or hedge.

kid hustlr · 31 July 2013

This is a REALLY interesting topic in the futures world as far as Im concerned. I'd love to know what percentage of successful, big traders average down. As I stated I think anyone without vast experience shouldn't be doing it, but I get the impression that all the guys with vast experience are doing it haha

CanOz · 31 July 2013

Trembling Hand said:
You talking after hours? No haven't even looked at them. Hopefully never will. If you are talking about the longer Honkers day time. No not really. Feel like I work too much with 6 hours a day. :

My point was that it looks like you unwound your position around 17:30, when the HSI RTH was closed...but now I've just realized that your chart is likely Melbourne time not HK Time and its Regular Trading Hours for the HSI anyway....So never mind

Trembling Hand · 31 July 2013

artist said:
What does this mean? Communication was down? If so, how did all the ensuing trades take place? I don't understand why you couldn't get out or hedge.

There is no "hedge". The exchange has the worst tech of any large exchange in the world. When you get these really fast sweeps an order can take 5 - 10 seconds to get to market. By that time the damage was done. There was no volume to trade into as some smart ar$e hits it with a 1000 lot and instantly its 100 points lower.

CanOz · 31 July 2013

The range chart is a great way to illustrate those sweeps

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