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Trvlwanderer,
You need to make a distinction here between averaging down and scaling in. I would agree that arbitrary averaging down is a losing proposition, but scaling-in is not. The distinction has to do with the concept of risk tolerance used in managing a trade. If for example you have a strict risk tolerance say 2% of your account balance, then scaling in within the boundaries of your risk tolerance becomes a viable technique to limit loses. See the thread "Trading with Market Statisitics VI: Scaling in and Risk Tolerance" for a more complete discussion. |
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I may have been misunderstood. I will scale in if the trade is still playing out and I need a better fill....but scaling in to lower my entry on a trade that is getting away from me is not a good idea. At least that is what my experience over the years has proven.
Now investing....different story. scaling in over time while my margin of safety is still viable is very effective for solid stocks.
Maybe I misunderstood the OP.
Trvl.