Stock Trading Strategy: How to Average Down

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Comments

1. One mistake, you should find the initial stop first. It is the point at which your premise is wrong. From your trading plan take the maximum loss allowed per trade and divide that by the $/Lot/tick. For example if it is the NQ and you can risk$200 per trade then the answer is 40 ticks that your average price must be no more than above the "I'm wrong, spot," otherwise known as your stop loss. If trading 2 lots your average price can be no more than 20 ticks from the stop and so on... Say you decide on 3 lots and an average price of 13 ticks above the stop. Is there room to get adequate profit, as described in your trading plan. Then decide where you want to arrange your entries to conform to your plan.
   
   The main dilemma with multiple entries is that the further back price comes, the less likely that it is going to return to your proposed trade direction. For this same reason, weighting your entries with larger size at more advantageous prices will tend to load you up on the losing trades and keep you light when momentum is high, the opposite of what you would wish for. Of course this entire discussion ignores the possibilities presented by using price movement to trade in and out of some lots as price wiggles. But then doing this puts you in a similar dilemma as mentioned above. The longer price wiggles around allowing you to improve your price, the less momentum/likelihood that price will eventually continue in your direction.
   
   Which brings us to the best method of all which is pyramiding in a trend.
   
   The second worst thing about averaging down, after the losses that are possible, is the opportunity lost because you are on the wrong side of the trade and should be adding to the trade all right but on the other side.
2. Adding every 50-1.00 without any technical analysis or experience is indeed fools gold lol
3. i belive in u....
4. So for long term investing buying more shares as it goes down is ok.but for short term trading not ok.did i understand that correctly?
5. I've been looking into this as a strategy, but rules built around it, and money management along with it, and would like your take.
   
   First, as a hard rule, I have a percentage I'm willing to take in heat before I give up on a trade like this. If it gets to that percentage of my account, I close out the trade.
   
   Second, additions to the trade are made on support / resistance levels on longer timeframes, and never "too close" to my original position, to give it travelling distance, not just mathematical / random numerical increments.
   
   And third, I only implement this strategy in the ES, as it is heavily manipulated, and generally, does not trend too far from the mean reversion without a number of head fakes and reversals.
   
   What are your thoughts on this?
   
   Note: I've been forward testing this for some time now and, while the losing trades are generally 3x the winning trades, my current win rate is averaging about 80%.
   
   Not saying it will work long term, and I certainly appreciate your opinions and videos (I've watched a great many of them) - I'm more looking for your thoughts to my specifics.
   
   Thanks again!
6. You will be risking 200k for only 6k .. bad strategy
7. I have an idea I want to share with you ... What would happen if u kept on buying 50 shares for example every 50 cents down , and booking profit every 50 cents up .. You will be adding to ur equity .. I know that the higher price stocks are in loss but if u keep adding to ur equity by taking all those profits u will cover all the losses in time , unless the stock goes to zero .. Do I understand what I mean ?
8. how do you know when to do it and when not to do it? I ask because nearly all of your live trade videos show yourself doing this strategy.. by the way, I used to play roulette like this, quick way to give the casino your whole bankroll, done it several times sadly.. saw black hit over 20 times in a row before, no bs..
9. Thanks for the video but what about using this with options and adding fees?
10. This is Martingale, not the same averaging down.
11. he is correct AND incorrect. dollar cost averaging is a horrible idea IF you are buying individuel stocks and/or you are using it daytrading or swing trading on a less than 1 year time horixon. dollar cost averaging is an incredible stategy to use IF you are investing in high quality ETF's (spy, vit, vt, xly, xlp, etc.) over a 1-40 year time horizon.. why? a individuel stock can go to zero but a ETF cant, over the long haul the market goes UP and not down.. also I never use stop losses WHEN TRADING HIGH QUALITY ETF's. looking back ALL my losing trades were due to : 1) using stop losses, 2) trading poor quality individuel stocks.
12. I listened to "another" teacher to never use a stop loss because you may not get the price you want. Any truth to this? Can I have a mental stop loss instead?
13. But realistically, a stock moves like this based on news or earnings or some sort of catalyst... So if you know the stock isn't doing bad fundamentally, news is good, and the market is doing well. Buying dips and doubling down, or whatever you want to call it, then it could still be extremely profitable right?
14. Obviously there are arguments on both sides. While I understand your position, I humbly disagree agree that only "suckers" use this method. Some of the world's largest investors, including Warren Buffet, have successfully used an averaging down strategy over the years. He recently did an interview on IBM where he announced his plans to buy more after the stock dropped dramatically in price.
15. thanks , appreciate the honesty. My broker was pushing it, but now going to be more cautious
16. Guys...this guy does not know what he is talking about!... he take bad average system and assume bad example...of course he will not succeed in averaging if he has naive idea.
17. What is the gain/loss column represent? and how does the Dist BE calculated?
18. double down kinda risk, I tested it
19. This is ridiculous, unlimited capital is out of reach of every one of us, which makes your video unrealistic math. Secondo, you can't compare a 7% win on 100k dollars with a 6.7% loss on on 1.575 million dollars to PROVE averaging down doesnt work. Tertio, you need to show the yearly chart to prove it never went back up again, because that is the proper of the averaging down, being patient while buying. And fourth, 0.50 dollars lower trigger to buy more shares is way too little. You would need to start buying at LEAST a whole dollar lower and then quickly move to 2$ and 4$ lower before buying because that is the smart way to manage risk. Try buying everytime it goes 10 cents lower and you will get what I mean, you didnt manage risk, you bought too many shares too quickly and then paid a big price for that idiot strategy all the way to 1.5 Million dollars!! lol Then try the same strategy buying when it goes 2$ lower only then 4$ lower.
20. You would have to be stupid to illustrate an example where a trader buys 50,000 shares of a $30 stock and loses $100,000 on a single trade and he started at 50 and 100 shares is a ridiculous non reality setting to demonstrate your point for real traders. Sounds like you trying to bash the strategy even though it's just MATH and you say you have no opinion but do have one as you try to scare others painting a picture that is not accurate. If you would trade 50,000 shares of a $30 stock that id down HUGE on the day you deserve to lose it all. You don't sound too smart - by the way I have followed you and your picks are MEAGER at best. Don't take this down as you need show the good and bad of what you try to put out in the public view.