The problem with averaging is that you make so big position and make so big risk. While you do it you are thinking that it would be great to swing that kind of size on positive trade. So you hope not only that position will come back to b/e but that you will profit really big with your size. Only, when things finally come to b/e you are not any more so convinced that it will move in positive side. You exit. Pain of being positive and than let it go down again would be to big to risk that. So only thing that you get with averaging is break even or tiny profit.
But why than I do it?
Probably because of situation like today, to get break even.
I think that it's not so much problem in averaging but in style of trading. By that I mean that I don't average all the times. Usually I average when I have some idea what will happen and than I don't want to abandon that idea while I'm proven wrong on it. It all than starts to look like some kind of swing trading but with sizes 3 times bigger than it should be for swing trading and adding 2 times more, size is 9 times bigger than it should be for swing trading.
Today that idea was that I saw some bullishness at the time I entered my first long. Than I took that and made a concept of eur/usd going up. It was only some up direction noise. Horizontal channel didn't break to the up but down. I could use that as swing signal but I was to busy with saving my position from loss.
So I took little scalping clue and turn it in some swing signal and it was totally wrong. That's why it's better for me to trade in more scalping style and took advantage of small triggers and small movements. If it's not working go out in a second and look for another.
+5 pips eur/usd
In usd/cad I saw that it could become top. I stayed in that trade long enough while I was busy with eur/usd. I could take more but I didn't want to risk it. In the end price came back so it's another confirmation that with my abilities swing trading is hard
There is enough oportunities for me in trading fast and taking small profits and small losses.
+15 pips usd/cad
In the end I took two 1/3 size positions in eur/usd and usd/cad I think just because of the rush of picking bottom/top.
Combined +2 pips
When I start day on the wrong foot with averaging and red positions I'm not any more for trading. I got messed up.
Wednesday, January 16, 2008
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