I average down with this method. I’m sure there will be lots of haters and nay-sayers telling me how bad this is, but with properly defined risk and stop losses there is nothing wrong with averaging down. I know where the hard stop is for every trade before I begin.
Although I may average down, I do not recommend you do it if you are not comfortable with the psychological and financial consequences of doing so.
I find that scaling in (averaging down) is necessary for people (like me) who cannot predict price direction. Trust me, if I could predict direction, my strategy and money management would be a lot different.
Scaling in is superior for people who can’t predict price direction (which is me) and who are trading strategies that lend themselves to scaling.
If I could predict price movement, I would go all in with my entire position right away.
And another trade almost immediately after the last one.
And AGAIN right after that one.
This one has you fully loaded as well.
HOLY COW you guys FIBS are MAGIC!!!!
Sometimes it doesn’t work at all.
(how can this be??? fibs are magic!!!!!!!!!!!!!)
Note that you will never get an explanation from a “fib guru” about this type of situation. They will just ignore it.
This picture illustrates why 38.2, 50, and 60whatever are not necessarily the optimal places for adding to your position if you’re creating an optimal system. Unless, however, you believe that fibs are magic in which case they are the only values you need!
And sometimes they never retrace to the Fibonacci lines:
OMG WHAT DO THE GURUS SAY ABOUT THIS???