Second alternative, going short once you have a brief currently in the red.
Roland Campbell out of Millionaire Traders averages down as his primary way of trading. I have seen his personal and handled account statements. Sometimes he takes 6-8 averages in 1 trade. Its strong so long as you use proper risk throughout the entire average.
Its utilized in zone to zone trading. When you believe that price will proceed from a general zone to the next, you don't have authoritative entrances and exits, so you develop a position in 1 zone, and you scale in the one that you're aiming for, or dump it if its not exercising.
Lets say that you notice there are obviously stops at a certain level that you believe the market will run. You are trading toward a point rather than from a point. That means you can begin getting in and pyramid up as it closes in or average down as it draws away . Then you dump your position on your target, or get out if it is not working out. Works great on around number breaks, option expiries, and post news volatility.
I recall reading that most martingale egies use this and there was a relatively common fib egy using this technique at retracements/moves to fib levels somewhere with this forum (or perhaps over at TSD, today I consider it).
I tried using it a couple of times with various demo's, but always squeezed the account as my first entry was crap and then I misread all of the signs for a change rather than a retracement. Would you also double your position on each re-entry like martingalers do as jest scale and suggested into the commerce?
Any idea what his possition sizing was for entries after the inital one? On 8 averages I cant imagine him raising dimensions considerably. And any notion about his ordinary win/loss?
Wow, It's been a while since I've been on FF...
There is a right way and a wrong way to average. The wrong way is what most men and women tend to use, and that is opening a trade, and then just doubling that order when the trade moves against them.
The right way to average would be to split your order into little bits and add on anything you're trading becomes cheaper and cheaper.
Let us say for example you generally trade 3 lots. If the EUR/USD is currently trading in 1.30, then put in a single lot at 1.30, the following at 1.2950 along with a third in 1.29. . This way you can get yourself in at a healthy price without over Implementing your account.
In addition, make sure that averaging makes sense with your entry/exit egy. If you're trading breakouts, it may not make sense. .
Zone to zone - that is where I always thought there was benefit - when the entrance is not an absolute number (scale in), or so the departure is not a defined goal (scale out).
But I can not see how round number breaks or expiries collapse inside that egory? The more specific the entry/or goal, the less benefit of scaling, surely?
Agree with this post 100 percent, I believe any kind of scaling or averaging in should be calculated with appropriate mm and entrance levels. Otherwise it would be like adding to a loss. It would be wholly different, of course, when we are building up a position since it goes our way.
Hi,
Superdezign is right: the maximum position should be the end-position containing of as many increments of person smaller positions as you see fit.
After I see a possible change in management, I set order types (limitations under the price and ceases over the price - or vice versa) to'construct' a position.
When the price gets of the starting blocks way enough, I route, if not well, I have sufficient book to escape even at worst.
I adhere to particular gaps between each order and typically have 4 orders for starters - then see how it goes.
regards