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Averaging down or scaling-in to a loser is an idea I have played with, but it only goes so far. Let's look at Dec GC for example. In the past 9 trading days it has dropped nearly $100 per ounce. That's 1,000 ticks.
So how many contracts are you into the thing, scaling-into the losing long position, before you are margin-called?
I've been running a test on the slow averaging-down thing, and am sitting, in this test, at 7 long contracts with a $17,000 unrealized loss.
So if the overnight margins are 6K per contract, I'm at margin needed of 7*6K (an example, I think the actual margin is lower) for $42K.
Position is down $17K
So I am on the hook for-$59K at settlement.
How much cash do I have on hand, and how far is this submarine going to sink? The averaging-down game is way too risky for a mid-cap account.
With that said, however...
If I had $500,000-$600,000 to play with? Sure, I might be able to make it work. But I ain't got it, so in this context it is too risk-averse.
bobwest
Western Florida
Site Moderator
Experience: Advanced
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Trading: ES, YM
Frequency: Several times daily
Duration: Minutes
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The original idea was to scale in just above your "puke point" (stop loss). If it goes down a bit more and you're stopped out or bail out, that's the end of the loss, and it's fairly small. If it turns around before you bail out, then your basis is better and your gain can be more. That's the best time to add, if the trade works. If the trade doesn't work, you're stopped out at the original stop level.
If you just hold on until it either turns around or you go broke, well that's not a good idea, but it's also not what the idea was. Sort of the opposite, in fact .
I am not sure tbh! I think that it will affect the price of USD which may shake some things up. I do not think it will affect too much honestly. The price seems to have recovered quite a bit.
If it goes back down, than it will but I do not think it will for now.
Tomorrow's job report will do some damage though. So that I look forward to!
The news just hit the wires and volatility is looking nice
I am still in my ZB short and I see that it went lower overnight. I am still holding it. I think that it will fall out the bottom when equities go out the top.
I also bought one contract on ES after the news was released.
Let's see what will happen...
rocksolid68
Duluth MN
Market Wizard
Experience: Intermediate
Platform: NinjaTrader/Sierra Chart
Broker: AMP
Trading: ES
Posts: 1,027 since Jan 2015
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Gold lagging behind! Hop on board before it crashes!
I am in one lot short! ZB is working AMAZINGLY
I bet these two make some nice moves today.
Early morning trades and I may be done for the day sooner than I imagined!
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