Well, this is how I look at it.
Having an averaging system (rather averaging ideology) is the way I have built my confidence in trading. When you look at a chart (daily preference) of any pair, outside of one or two instances, there will always be a retrace of a major move.
The reason I lost money in my first 6 months of technical trading is because I would kill a trade because I feared I would lose everything, or that my system was not correct in its signal. It is important to note I closed my order before getting a signal to go the other way or to get out of my current position with a loss. It is also important to realize I traded heavily enough that I would have infact, LOST EVERYTHING. Though since, I have looked at things in a different light. It humors me to see that the GBP/USD is at the exact same price now as it was 30 years ago. But that is not relevant.
On the GBP/USD there was a 1.8950 - 1.9850 uptrend followed by a 1.9850 - 1.9500 retrace. If your numbers are a little different it is anywhere from 30-40% retrace. I am referencing moves that occur uninterupted. One could call the move that started in October up to December the same move, though I dont consider it to be.
Look at April into May of this year. That was a 3000 pip move followed by a 1000 pip retracement. Would you have been stuck in that full 3000 pip move? Heck no! Your system, be it trend lines, channels, MAs, breakouts etc would have had you going with the trend before your short would have been drawn down 3000 pips. However, this is where the averaging ideology comes in so important. If you COULD HAVE not just survived that 3000 pip move but make money after all is said and done.... why are you afraid and lose in your trades? I found a way to survive that move, an now trade without fear.
Averaging in itself I suppose isnt a system. I do have a sub account I trade without stop losses and do average in in interest postive positions only. USD/CHF gave me an entrance at 1.27 (1), 1.2450 (2) 1.2025 (4). So current position is down $300. However, I am earning $5.50/day just holding the position. It obviously does work better with JPYs. I will only average in every 275 pips because of a recent 1600 sustained move. I will also only enter when given a reliable signal. But to answer a question, yes, it is a 1, 2, 4, = 7 mini lots or .7 standard lots.
Averaging can be used as a system by itself, though I dont believe in that. I believe for carry trades and long term trading it can be a savior. Also, if you have a 70% system, double after every loss. If your system loses 1 trade with 1 lot, trade your next at 2 lots. If it loses that use 4.
I hope I didnt mislead anyone, just figure out how you CANT lose... then things just seem to work a whole lot better ;). At least for me they have.
"Never stop thinking. That one incredibly profound thought... makes a lifetime of thinking well worth it." - By Me.
AI
