Does anyone find any validity in the statement below? Doesnt it go against one of the biggest rules of trading: "Dont add to losing positions"...
From Kathy and Boris's new book:
"7. Averaging Down Is for Losers, but Averaging in Can Be the Difference Between Success and Failure
Most traders will tell you that averaging down into a trade is a mug’s game. However averaging in is a strategy employed by a number of our interview subjects to a great success. What’s the difference? Intent. Traders who average into the positions expect to be initially wrong on price and size their trades accordingly. Roland Campbell is one such trader:
That to me is absolutely the key to my success. I average in on
every trade I make and I average out whenever I exit. I have a
tendency where, as soon as I buy a currency, it will dip 10 pips.
Before I would get upset, but now I love it because I feel like I can get in at a better price, so I hope it dips another 10 pips. I know the price I want, so I will average into that price. Roland allows himself about four average ins before he calls it quits. “If it goes much further than four average downs, I have to start considering whether this is the right trade to be in,” he notes, “but nine times out of ten that strategy works for me.” Roland always knows his “uncle point” and unlike novice traders who are never willing to pull the plug on a bad idea, Roland will always stop himself out when a trade goes bad. However, in the majority of the cases, he will succeed in turning a profit on most of his scale in strategies, showing once again that all rules of trading can be broken as long as they are done so for a good reason."
From Kathy and Boris's new book:
"7. Averaging Down Is for Losers, but Averaging in Can Be the Difference Between Success and Failure
Most traders will tell you that averaging down into a trade is a mug’s game. However averaging in is a strategy employed by a number of our interview subjects to a great success. What’s the difference? Intent. Traders who average into the positions expect to be initially wrong on price and size their trades accordingly. Roland Campbell is one such trader:
That to me is absolutely the key to my success. I average in on
every trade I make and I average out whenever I exit. I have a
tendency where, as soon as I buy a currency, it will dip 10 pips.
Before I would get upset, but now I love it because I feel like I can get in at a better price, so I hope it dips another 10 pips. I know the price I want, so I will average into that price. Roland allows himself about four average ins before he calls it quits. “If it goes much further than four average downs, I have to start considering whether this is the right trade to be in,” he notes, “but nine times out of ten that strategy works for me.” Roland always knows his “uncle point” and unlike novice traders who are never willing to pull the plug on a bad idea, Roland will always stop himself out when a trade goes bad. However, in the majority of the cases, he will succeed in turning a profit on most of his scale in strategies, showing once again that all rules of trading can be broken as long as they are done so for a good reason."