trader_dante
Veteren member
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Well, that was my plan but what I was really doing was taking a very small position and then had orders to build into my intended full position size by buying more at some of the bigger levels on the way down. The problem was, as soon as I got in, it went onside so I kept capturing the moves up whilst at my lowest possible position size. LOL
If i average (or split my trades) within an area, it's not as profitable as using all my contracts together in one trade (that's if i can get a good entry right). We can all talk perfection, but very often the daily grind does not offer perfection, in fact, what seems to be perfect is often taken advantage of by someone on the otherside, BOs are a good example of this. Of course, traders shouldn't just try to average everything in sight out.
Like with everything else in life, if you do something to correct a problem and THERE IS a good and valid reason for that action, it is good. In the same sense, averaging down may be a good action to take if there is good reason for that, a proper analysis is conducted and it shows that instead of giving away your money to the market you can even recover some or make some profit.
But if someone averages down based solely on hope that things will turn around then of course it is not a good strategy, it is plain disaster.
Thus IMO there is no clear answer but depends on
(a) The quality of the trades involved
(b) The ability of the trader to evaluate the market conditions
(c) Whether the trader is unbiased and not emotionally driven
(d) MORE IMPORTANTLY, it depends on the "portfolio heat" that such strategy will create in terms of percent risk.
For me it has worked just a few times. I must admit it failed more times than it worked. I must also admit that the best trades seem to be those that show a profit right away. My analysis shows that regardless of ability and motives, most trades that go against you will force you at some point to take a loss unless you are in a channel market and not a trend moving against your position.
Personally, I avoid averaging and it is a strategy of last resort when there is strong evidence to show reversal of prices in favor of original position.
But if someone averages down based solely on hope that things will turn around then of course it is not a good strategy, it is plain disaster.
Thus IMO there is no clear answer but depends on
(a) The quality of the trades involved
(b) The ability of the trader to evaluate the market conditions
(c) Whether the trader is unbiased and not emotionally driven
(d) MORE IMPORTANTLY, it depends on the "portfolio heat" that such strategy will create in terms of percent risk.
For me it has worked just a few times. I must admit it failed more times than it worked. I must also admit that the best trades seem to be those that show a profit right away. My analysis shows that regardless of ability and motives, most trades that go against you will force you at some point to take a loss unless you are in a channel market and not a trend moving against your position.
Personally, I avoid averaging and it is a strategy of last resort when there is strong evidence to show reversal of prices in favor of original position.
Peaceful_Warrior
Junior member
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The only time I average up is when I’m already in profit and see another opportunity suggesting that the trade is going in my favor.
The way that I do it is by adjusting my stop loss so that my original trade is in profit and then use the margin that I regained from the adjustment to add to my position. In saying that, I rarely do it as I mainly scalp these day’s.
Oh yeah I never increase/add to a loosing position, protecting capital is high on my list of trading rules also my stop losses are generally tight.
The way that I do it is by adjusting my stop loss so that my original trade is in profit and then use the margin that I regained from the adjustment to add to my position. In saying that, I rarely do it as I mainly scalp these day’s.
Oh yeah I never increase/add to a loosing position, protecting capital is high on my list of trading rules also my stop losses are generally tight.
arabianights
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Right ladies and gents, here's the averaging journal. Based on Euroswiss STIR front month. It's not everything I do but it's pretty close 
Pre open Analysis: Probably going to open up, based on Jordan on Fri, offers and a few trades at 54 last Fri after NFP... let's offer 55, 56, 57 big 50,51,52... in any case I don't know what the levels are going to be but what I do know is that they are reasonably likely to change and also that today is likely to be pretty low volatility. Perfect environment for averaging!
7:29:30: Pull offers at 55, 56. All of last week 53-52 were the levels pretty much, although mindfull last Monday it came off for little reason. LIbor pressures easing in dollars (allegefly) and swiss libor is edging down which is helpful for those of us trading long.
*Gilt and Sterling trades, irrelevant to averaging journal*
9:30: Bacon Ciabatta and Irn Bru. Yum!
10:02:35 Bought 27 lots front month swiss @ 53
10:04:25 Bought 23 lots front month swiss @ 53
10:11:44 Bought 28 lots front month swiss @ 52
10:37:33 Bought 1 lot front month swiss @ 52
10:41:51 Bought 6 lots front month swiss @ 52
10:48:36 Consider putting bids to catch stops/panic in weak looking June. Decide can't be bothered but will do March June and June Sep spreads for this purpose instead. Don't care about Bund or Bor having ticked down 'should' (haha) have no impact on Swiss
10:50:46 Final 15 lots bought. Now 100 lots long @ average of 52.5. Consider offering 53s rather than 54s, decide against it
10:53:50 Realise I have 4 offers in at 54. You're only supposed to have 1 in, this isn't pracitcal but more than 3 and LIFFE can get arsey. Still, don't bother doing anything about it as I'm not doing it to gain an unfair advantage, if anything it's a hinderance to me... and it's not my fault their system is rubbish!
10:57:49 inform Chatzy I am doing a journal about averagin. Little do they know how boring it will be!
11:13:15 Notice there is a carrot on television. Reminded of what I was doing on Friday evening.
11:20:48 scratch nuts
11:51:50 Have done a few bad trades on the gilt, down but only small, up more on Sterling, but all small numbers. Only hope of useful money is from Swiss and it's not going to be big money by any means! Swiss LIBOR has come out and it's gone my way as expected.
12:00:52 Sadly no surprise rate cut at 12 which would have made this journal at least worth reading. Have to pin hopes on a terrorist attack.
12:06:49 200 lots traded at 53 10 seconds ago, if I'd had any sense I would have had an offer there!
12:48:44 Missing out on pub due to not having got out of any at 53. Silly bugger!
13:07:00 Everyone in main office apart from me is in pub, in msn convo with only other person in firm daft enough to trade swiss. Going to shoot a few pedestrians to pass the time.
13:10:29 shared a chuckle with everyone else in the chatzy room about spanish's cv
13:11:29 53 goes bid, I decide to get out of 50 lots and hit it, then reduce offer at 52 (only 2 orders there now in fact: to be ABUSIVE what I should do is reduce one of my orders by 1 lot and then add a 1 lot in, this will give me better fills on the other 2 orders, but I won't do that). Now I only have 50 lots on (got 49 in a bottom draw swiss spread and 20 in a sterling spread but neither of those are an issue) I reckon I can get away with going to pub. Naturally stick another 50 bid in at 52..
15:51:14 come back from pub, had a bit. See that sterling spread has traded out as expected. 70 offered at 53 and consequently move my 50 lot offer down to 53. I put down 48-1-1 as my offers because I can and this will help my offer. Note that in the pub I was checking on the market so nothing that has happened is too surprising. I don't really want an overnight (other than my bottom draw spread, which incidentally has moved in my favour today although I don't read anything into that) although I'm happy enough to take this march long if I don't get out at 53.
15:56:18 take a look at trade2win to see if there is any trolling worth doing.
15:59:08 woohoo got 4 lots filled at 53. My Sterling wins and Gilt losses have almost exactly balanced each other out; ignoring transaction costs I am down by five quid (seriously!) so this now puts me in positive money minus transaction costs (eep). Not enough to eat but disregard that.
16:01:04 some good selling in back months. Excellent as I am long the previously mentioned bottom draw bugger!
16:15:00 presumably in settlement trades (Swiss is settled based upon trades approximately around 16:!5, complex boring thing) both my 1 lot orders have been filled and I've had a few other fills at 53. 33 lots to go. BORED.
16:23:02 as an experiment going to pull my 53 offer in case everyone else is automated
16:23:03 didn't work, put them back.
16:33:29 Quick few quid on FTSE close, only did a few lots though...
16:34:11 Yet another ****
16:39:11 Blatantly obvious spoof on June is being pulled... givinng me a nice 13 extra lots on my March. 23 lots remaining of which I am 20 (because of my pulling my offer!)... would consider pulling the offer but can't be arsed as it seems blatantly going to trade out.
16:40:50 Pulled anyway, also I bought the 3 lots remaining just to see if a bid is attacted. For the moment I'm offering 54s but that is only in case of a freak trade lifting offers, my real intention is to hit 53s if they happen.
16:42:01 1 offered, going to take it, if I get 2 of them I can get priority order at 53...
16:44:50 decide I will buy 1 lot at 54 and then offer 25 at 53. Then if any 53s trade I will get them
16:45:33 and now I have 25 lots offered at 53, if any 53s trade I am going to be getting them all under the assumption 52s don't trade out. Really I'd rather be down the pub though.
16:50:56 Very tempted to just leave the 53s where they are and run it overnight if it doesn't trade... then again have inertia about getting up to deal with In any case I see no reason to get out of the ****ers at 52.
17:00:00 so another 49 lots have joined my offer.. that's actually implied from the 54 offer on June... christ this is boring.
17:05:56 on the bright side plenty of spanish lulz going on
17:12:30 someone, probably a convicted paedophile, shorts march june. I think this is most likely rolling a position.
17:43:52 Say in chatzy, to no one in particular: arabianights: ****s sake, why am I sitting here to see if 25 lots trade that I'll take overnight if they don't anway?
17:54:11: More of the amse lulz going on. extraordinarily bored but might as well see the last five minutes to see if I trade or not. I suspect anyone with sense has gone home an hour and a half ago.
18:00:00 absolutely no point in staying through in the end! 25 lots taken over... jeez...
Anyway... that's how you average.
Pre open Analysis: Probably going to open up, based on Jordan on Fri, offers and a few trades at 54 last Fri after NFP... let's offer 55, 56, 57 big 50,51,52... in any case I don't know what the levels are going to be but what I do know is that they are reasonably likely to change and also that today is likely to be pretty low volatility. Perfect environment for averaging!
7:29:30: Pull offers at 55, 56. All of last week 53-52 were the levels pretty much, although mindfull last Monday it came off for little reason. LIbor pressures easing in dollars (allegefly) and swiss libor is edging down which is helpful for those of us trading long.
*Gilt and Sterling trades, irrelevant to averaging journal*
9:30: Bacon Ciabatta and Irn Bru. Yum!
10:02:35 Bought 27 lots front month swiss @ 53
10:04:25 Bought 23 lots front month swiss @ 53
10:11:44 Bought 28 lots front month swiss @ 52
10:37:33 Bought 1 lot front month swiss @ 52
10:41:51 Bought 6 lots front month swiss @ 52
10:48:36 Consider putting bids to catch stops/panic in weak looking June. Decide can't be bothered but will do March June and June Sep spreads for this purpose instead. Don't care about Bund or Bor having ticked down 'should' (haha) have no impact on Swiss
10:50:46 Final 15 lots bought. Now 100 lots long @ average of 52.5. Consider offering 53s rather than 54s, decide against it
10:53:50 Realise I have 4 offers in at 54. You're only supposed to have 1 in, this isn't pracitcal but more than 3 and LIFFE can get arsey. Still, don't bother doing anything about it as I'm not doing it to gain an unfair advantage, if anything it's a hinderance to me... and it's not my fault their system is rubbish!
10:57:49 inform Chatzy I am doing a journal about averagin. Little do they know how boring it will be!
11:13:15 Notice there is a carrot on television. Reminded of what I was doing on Friday evening.
11:20:48 scratch nuts
11:51:50 Have done a few bad trades on the gilt, down but only small, up more on Sterling, but all small numbers. Only hope of useful money is from Swiss and it's not going to be big money by any means! Swiss LIBOR has come out and it's gone my way as expected.
12:00:52 Sadly no surprise rate cut at 12 which would have made this journal at least worth reading. Have to pin hopes on a terrorist attack.
12:06:49 200 lots traded at 53 10 seconds ago, if I'd had any sense I would have had an offer there!
12:48:44 Missing out on pub due to not having got out of any at 53. Silly bugger!
13:07:00 Everyone in main office apart from me is in pub, in msn convo with only other person in firm daft enough to trade swiss. Going to shoot a few pedestrians to pass the time.
13:10:29 shared a chuckle with everyone else in the chatzy room about spanish's cv
13:11:29 53 goes bid, I decide to get out of 50 lots and hit it, then reduce offer at 52 (only 2 orders there now in fact: to be ABUSIVE what I should do is reduce one of my orders by 1 lot and then add a 1 lot in, this will give me better fills on the other 2 orders, but I won't do that). Now I only have 50 lots on (got 49 in a bottom draw swiss spread and 20 in a sterling spread but neither of those are an issue) I reckon I can get away with going to pub. Naturally stick another 50 bid in at 52..
15:51:14 come back from pub, had a bit. See that sterling spread has traded out as expected. 70 offered at 53 and consequently move my 50 lot offer down to 53. I put down 48-1-1 as my offers because I can and this will help my offer. Note that in the pub I was checking on the market so nothing that has happened is too surprising. I don't really want an overnight (other than my bottom draw spread, which incidentally has moved in my favour today although I don't read anything into that) although I'm happy enough to take this march long if I don't get out at 53.
15:56:18 take a look at trade2win to see if there is any trolling worth doing.
15:59:08 woohoo got 4 lots filled at 53. My Sterling wins and Gilt losses have almost exactly balanced each other out; ignoring transaction costs I am down by five quid (seriously!) so this now puts me in positive money minus transaction costs (eep). Not enough to eat but disregard that.
16:01:04 some good selling in back months. Excellent as I am long the previously mentioned bottom draw bugger!
16:15:00 presumably in settlement trades (Swiss is settled based upon trades approximately around 16:!5, complex boring thing) both my 1 lot orders have been filled and I've had a few other fills at 53. 33 lots to go. BORED.
16:23:02 as an experiment going to pull my 53 offer in case everyone else is automated
16:23:03 didn't work, put them back.
16:33:29 Quick few quid on FTSE close, only did a few lots though...
16:34:11 Yet another ****
16:39:11 Blatantly obvious spoof on June is being pulled... givinng me a nice 13 extra lots on my March. 23 lots remaining of which I am 20 (because of my pulling my offer!)... would consider pulling the offer but can't be arsed as it seems blatantly going to trade out.
16:40:50 Pulled anyway, also I bought the 3 lots remaining just to see if a bid is attacted. For the moment I'm offering 54s but that is only in case of a freak trade lifting offers, my real intention is to hit 53s if they happen.
16:42:01 1 offered, going to take it, if I get 2 of them I can get priority order at 53...
16:44:50 decide I will buy 1 lot at 54 and then offer 25 at 53. Then if any 53s trade I will get them
16:45:33 and now I have 25 lots offered at 53, if any 53s trade I am going to be getting them all under the assumption 52s don't trade out. Really I'd rather be down the pub though.
16:50:56 Very tempted to just leave the 53s where they are and run it overnight if it doesn't trade... then again have inertia about getting up to deal with
In any case I see no reason to get out of the ****ers at 52.17:00:00 so another 49 lots have joined my offer.. that's actually implied from the 54 offer on June... christ this is boring.
17:05:56 on the bright side plenty of spanish lulz going on
17:12:30 someone, probably a convicted paedophile, shorts march june. I think this is most likely rolling a position.
17:43:52 Say in chatzy, to no one in particular: arabianights: ****s sake, why am I sitting here to see if 25 lots trade that I'll take overnight if they don't anway?
17:54:11: More of the amse lulz going on. extraordinarily bored but might as well see the last five minutes to see if I trade or not. I suspect anyone with sense has gone home an hour and a half ago.
18:00:00 absolutely no point in staying through in the end! 25 lots taken over... jeez...
Anyway... that's how you average.
I never average down beyond my predetermined stop level. That is the fastest way to blow up an account, period.
I usually spread my entry (and often my exits) over perceived S/R levels, or topping/bottoming formations. This may involve putting part of my stake on at one level, then the next part at a slightly better (or sometimes slightly worse) price. It is rare to catch an optimum price level at one go, but over a few trys you can normally get close. In effect I am therefore averaging my position for a slightly better price, but if the trade is still good this is fine in my book, providing your risk is controlled.
Shifting back stops and mindlessly averaging losers is a totally different thing, and should be avoided at all costs. We have all been there... I would much rather get stopped out of a position and get back in at a better price once the momentum against my view has truely stalled > shifted. The majority of losing trades do come good eventually (provided you trade with the trend/underlying sentiment or whatever), but huge rallies/falls in prices can happen at any given moment, enough to hit even the widest of stops. Why take the chance?
I usually spread my entry (and often my exits) over perceived S/R levels, or topping/bottoming formations. This may involve putting part of my stake on at one level, then the next part at a slightly better (or sometimes slightly worse) price. It is rare to catch an optimum price level at one go, but over a few trys you can normally get close. In effect I am therefore averaging my position for a slightly better price, but if the trade is still good this is fine in my book, providing your risk is controlled.
Shifting back stops and mindlessly averaging losers is a totally different thing, and should be avoided at all costs. We have all been there... I would much rather get stopped out of a position and get back in at a better price once the momentum against my view has truely stalled > shifted. The majority of losing trades do come good eventually (provided you trade with the trend/underlying sentiment or whatever), but huge rallies/falls in prices can happen at any given moment, enough to hit even the widest of stops. Why take the chance?
