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Yeah I know. But I'm using 1/3 the capital that I would otherwise use. Hopefully there will be some good movement.

Silver chart:

If silver drops more than 33% I wonder what will happen to USLV, which is a 3x weighted version of silver. So theoretically if silver fell by 34% USLV would fall by 102% so there would have to be some sort of reverse split or something.

Can you explain the concept correctly then so we understand it better?

Unless what? (message too short)

I assume he's referring to the way I trade.

The $6.95 order was filled at $6.01 this morning when the market gapped down at the open. I got up and saw it was trading at $6.05 or so and was like "whoa, I wonder what price I got filled at" and then saw it was filled at the open.

USLV is weighted silver and I don't think silver is going to zero. The next buy position is 1,600 shares @ $6.95. I'm not using very much of my account on this trade so even if it takes a while to go back up that's ok. I agree with you about not trading individual stocks like this. I only do the indexes, and now recently silver. I am a little more nervous about the silver trade than the S&P so let's see how it goes.

And now back on topic, if anyone is paying attention rather than arguing, I've been trading USLV (3x weighted SLV) with this method since April. I bought 185 shares @ $10.81 on April 15th. On May 15th I placed an order to buy 400 shares @ $9.00 which was filled on May 17th. On May 17th I then placed an order to buy 800 shares @ $7.92 which was filled on June 11th. And just again for the people who don't seem to quite get what I'm saying, I never said the market is actually random, I just said that it's random to me. It might not be random, but I have no idea how to predict it, so that makes it random to me. It might not be to you.

Theoretically yes. Assuming you are talking about stock trades, you may have double the money (or 4x if you're a pattern day trader). Other markets may have their own leverage system so for now we're only talking about stocks. Yes. Your account will say something like this: Cash balance: $30,000 Buying Power (non-Margin): $30,000 Buying Power (Margin): $60,000 These values may change depending on if you currently have any positions. Different stocks may require different levels. If you do more than 3 round trips in a week and your account gets labeled as a pattern day trader, you may get 4x margin. A margin account lets you bypass the waiting period for funds to become available. No. I have 2x margin in my account (I don't day trade stocks) but I don't actually use the margin, it's just there because I happen to have a margin account. Keep in mind that just because you have margin doesn't mean you have to use it. In the example you gave with a $30,000 account, even if you have a margin account and they give you $60,000 buying power, as long as you don't buy more than $30,000 worth of stock you won't be using margin and you won't be charged any interest. Correct, it would be available immediately.

I didn't know it was the holy grail.

So I notice that the ES barely gets unbalanced (sometimes it will be like 15,000:20,000 for a moment, usually closer to 18,000:20,000). Some other instruments get big, 2:1 or more imbalances, such as gold and CL. Their volume is also much lower. The CL might have 200-600 contracts on each side and gold like 50-150.

I assume from your name you are trading Forex. I wouldn't recommend trading Forex like this but it's up to you. I think the adds would be too far apart. If it works for you, cool, but I think you'd need more than a week of testing.

I think it's doable with $100k. The initial sizing is going to be small and some people might not like that. Everyone wants to make a ton of money on every trade and so they won't like using small position sizes. The one trade I mentioned ended with a net of over $41k and was open for a few months. My most recent trade involved QLD, which I just closed out on Friday (posted in real time in my journal thread and on Twitter) for less than $3,000 gain in 5-6 months. Why? Because the Nasdaq didn't move very much since I bought it. So people are going to say "you made less than $3,000 in 6 months, that's like less than 1% of your account, you suck and your system is stupid." But I'm sure none of those people post real time trades, and I'm sure none of them are consistently profitable. People love to criticize other people's trading. Do well and it's "you got lucky, but your method sucks." Do alright and it's "you suck, just buying and holding the S&P500 would've gotten you higher returns." Lose money and it's "you suck, your system sucks and/or you don't follow the rules." I'm ok with only making a little bit or nothing when the market goes up without retracing, because the alternative for me is buying a big position and losing. When the market goes up and down, I do pretty well. The initial target is the previous high before the pullback. Depending on how low it goes, the target can change. For example, if SPY drops from $150 to $50, I probably wouldn't keep $150 as the target. I agree that pyramiding in (adding smaller position sizes as price goes in your favor) is a bit safer because it doesn't raise the average cost so much, but that requires starting with a big initial position. What happens if you're wrong? Disagree. Well I guess I'm trading with the long term trend since SPY is higher than it was when it started, technically we're in an uptrend. I don't look at it that way, though.

I'd be interested in reading that. I'm always looking to improve the way I trade, and averaging into winners hasn't worked for me as it requires predicting price and knowing when price is going to reverse to prevent the winners from turning into losers, but I'm always open to learning more. It doesn't have to be an uptrend. Assuming you define an "uptrend" as a series of HHs and HLs, and a "downtrend" as a series of LLs and LHs, I would still scale into a downtrend, too. In fact, downtrends may go lower than uptrend pullbacks allowing you to get even more shares. Assuming you define a trend by the slope of an MA, well then, I have no idea, because in that case the "trend" happens to depend on the length of MA you chose. I think the concept of a "trend" is a bit undefinable, anyway, but uptrend OR downtrend, I'm still buying more as price goes down. Correct. Leveraged ETFs are ok, but using margin is not. No loss from a long position is taken. Sometimes if I am trading the opposite direction at the same time I might exit that one for a loss but only if the main S&P position is exited for a net gain. You can see an example of this in my other thread. Correct. It can be whatever you want. Originally I used Fibonacci retracements just because I wanted to show that any levels can work while simultaneously making a point that Fibonacci numbers have nothing to do with trading. You can use whatever levels you want as long as they are spaced in such a way that you can still add more if price goes lower and you use appropriate position sizing. You know, it depends on where the S&P is when I begin. Sometimes I more than double with each add, sometimes I double. The general idea is to lower the average cost by a decent amount with each add. In the big trade I mentioned in the other thread, the adds were: May 5, 2011: 200 @ $134.22 May 16, 2011: 600 @ $133.32 May 23, 2011: 1,000 @ $132 (please note these first 3 adds were Fibonacci retracements of a recent swing:chart. The reason I got filled at $132 and not $132.44 where the actual retracement was is because price gapped down below that price on the morning I got filled. Please also note I don't think there's anything special about Fibonacci retracements) August 2, 2011: 1,400 @ $ 127 August 8, 2011: 2,500 shares @ $115 The at this point I was going to start buying SSO if SPY got to $105 or $100, but it never did, so I didn't buy any more after that last point. During the time this trade was open I was also periodically buying SH (inverse SPY) and closing it out for profit to lock in some gains as price moved against me. It helps reduce drawdown and if price goes back and forth within a range I can close and reopen the position. You can see exactly when and how much SH I bought in my journal thread. The last point is correct. As I've mentioned, sometimes you end up with either a small position as price goes up, or sometimes you end up waiting while price bounces around a range that is lower than your target profit but higher than your next add point. If you are using SPY you might be getting a decent dividend during this time (less so with SSO), and you can also hedge with SH and close it out on the down swings (while SPY stays open). Yeah. Well my trading capital is less than $1M, but as I stated in the other thread it's probably not the right strategy for a $10,000 account. I mean you could do it, but commissions at the first levels would take a big chunk out of your profits, and your overall dollar amount of return probably wouldn't be much. My goal is just to make consistent profits over time. Sometimes price doesn't retrace and I don't trade. Sometimes I have a small position that goes up. Sometimes I have a position that is sitting in drawdown for a period of time while price decides what it wants to do. These come with this type of trading and like I said, this isn't the holy grail, nor is it the way for everyone to trade, nor is it even the way for most people to trade. Most people want to chase trends and don't have the patience to sit on a position that is drawn down more than 2% of their account for weeks or months. Sometimes I make a good return. Sometimes I make a small return. I like big wavey markets but it doesn't always do that. Let me know if you have any other questions.

I have a few journal threads on another forum whose name has an abbreviation that is the same as the name of a movie about an extra terrestrial. I think I read that we aren't supposed to link to that forum but if you were to search my username you would probably find it.

Until I learn how to detect that external force, I'll continue to trade the way I do. I don't know when a trend is starting, and once I see one in hindsight, I don't know how much further it will go. The idea of trading with the trend appeals to me on an emotional level, but it doesn't work for me on a practical level.

I can't even do that. Agreed. I would also add the condition that if you ask a specific question, expect a specific answer. So many "gurus" answer with vague garbage that seems profound but really doesn't say anything, especially in response to questions about why they didn't happen to take trades that their system would've triggered that would've ended up being losers (for example, like if someone is saying MACD is the holy grail and posting after the fact charts only showing winning trades and ignoring all the signals that fit their rules but would've been losers, and you call them on it). If someone cannot give you a specific answer to a specific question, it means one of the following: 1) they are BSing you 2) they are unable to explain in a way you can understand (this happens sometimes) 3) they don't want to teach you In all 3 cases, they aren't someone you can learn from, so move on. Agreed, with a heap of nonsensical "explanations" thrown in. Completely agree. Of course I'm not charging anything, but I've been posting every trade in real time for years, something that I haven't seen a "guru" do. Funny how it works like that.

That's awesome! If you are able to short when price is going down and are consistently profitable, then keep doing what you are doing! I am unable to trade that way (I never know when price is going to come back up!) so I have to trade this way. I feel like some of these replies are framed like I'm trying to say this is the only way there is to trade. I hope no one thinks I'm saying that. I'm only sharing the way I trade, which is (currently) the only way for me, because I cannot predict price direction so all this "trend following" stuff doesn't work for me. I would love to be a trend follower. I would love to let the market stop me out when the trend reverses. I haven't had any luck with that, although I still come up with new ideas and test them all the time.

I would never be in either scenario because I don't add to winners. It's not about being right or wrong. If you've "already been proven right twice," that's awesome. Do you know when to exit before your winner turn into a loser? I don't. That's why I don't trade that way. Your scenarios aren't really applicable to how I trade because a) they used equal position sizes at each add and b) I wouldn't add to winner anyway. But I'll give you this: Scenario C: buy 1 @ 3, buy 3 @ 2, buy 5 @ 1. I'd be happy to be in that scenario. Average cost is below 2 and a small retracement will get me back into the positive. The exit would likely be 3. Cheers. I am here for discussion anyway. Yes, as I mentioned, sometimes price starts going in my favor when I have a small position. I don't have big winners when that happens, but I don't ever know if that's going to happen or not, either. That post is from over 4 years ago and is related to daytrading the ES from back when I was still trying to learn how to predict price movement. Needless to say I was never successful.

Think about like this. If you're adding to a winner, your average cost is going up with each add. The more you add, the close it gets to the current price (assuming price is still moving in your favor). When do you call it quits? Now? Now? Oops, you waited too long and now price just moved against you and your winner is now a loser. If you have a systematic method for closing winners that have been added to while they are still winners, then do it that way. I do not. I do not know when price is going to reverse. I do not know how many times I can add to a winner before it will reverse and turn into a loser. I do know that if I keep adding to losers with proper position sizing and money management, eventually it will reverse and become a winner. That's why I do it the way I do it. I do not add in with equal parts. I make each subsequent add larger than the previous to lower the average cost more than with equal parts. Sometimes that happens. As I've mentioned before, I don't make much money when that happens because it happens with a small position. That's one of the downsides of trading like this is that sometimes price just slowly trends upward and I either don't have a position at all, or I have a small position. Again, this is not the holy grail. There are situations when it doesn't make a lot of money, and that is one of them. I've mentioned all this before, too. Yes, if price goes up and I have a small position or no position, it minimizes the profit. But I don't see it as a bad thing, it's just an aspect of how I trade. It's a weakness of my system. It doesn't result in losses, but it results in smaller profits sometimes. It's something I'm willing to accept because the opposite side of that is the more price moves against me, the more I make. Good, because I've been trading it profitably with all entries posted in real time for years. Yes, position sizing is important. I have to start small and scale in. Sometimes this results in very small winners. When price moves against me, it eventually results in bigger winners. It's the only way I can do it since I can't predict price direction. I structure my position sizes such that I don't have to take losses. Sometimes I don't make much. Sometimes I have big wins. It depends on what the market does. If you trade this style with a hard stop, eventually it will be hit and the loss will be catastrophic, requiring perhaps years to recover. Since I can't predict price, I wouldn't know where to put a stop loss, and so the only way I can do it is to use position sizing that doesn't ever require a stop. It's also why I don't use margin.

And you forgot about the part where I said price is random. Sure it is. If you add to winners and price keeps going in your favor, you make more. But how long do you let it go in your favor for before it reverses and turns your winner into a loser? And then what do you do? Cross your fingers and hope it goes back up? To each their own. It wasn't my intention to convert anyone or convince anyone that this method is the best way. I'm only sharing the way I do things because it might help someone else think about things differently. Entries and exits are discussed in this post: http://www.traderslaboratory.com/forums/technical-analysis/16226-how-i-trade-if-price-random.html#post178883 I've also been posting every entry and exit in real time (or before) for years in my journal threads on another popular forum. I use the same username there so you can probably find it easily. I recently started posting them on Twitter, too, but that's just in the last few weeks so it doesn't have my complete history the way my journal threads do.

To be fair, recently I've been getting into trading the weighted indexes (SSO, QLD) which doen't pay much dividend at all but let me buy the equivalent of a much bigger position for cheaper. Assume I have $10,000 to spend on the initial entry and lets use the current SPY and SSO prices as examples. SPY is $159.74. That means I'd get 62 shares ($9,903.88). SPY also pays a 2.03% dividend which means if I ended up holding this position for a year I'd be paid approximately $203. But SSO is 2x weighted SPY so it moves approximately twice as much as SPY. SSO is $75.77. SSO pays a .44% dividend. So if I wanted to buy an SSO position that was equivalent to $10,000 worth of SPY, I would only need to buy $5,000 worth, or 65 shares ($4,925.05). If the S&P goes up 5%, SPY will be worth about $167.72 per share, and my 62 shares would be worth $10,398.64, which is a gain of $494.76. If the S&P goes up 5% then SSO will go up 10% to approximately $83.34 and my 65 shares would be worth $5,417.10, which is a gain of $492.05. So you can spend half as much and get the same total return. But of course SSO doesn't pay as much dividend so you're giving that up.

There are really only two ways this strategy can lose: 1) if the S&P500 goes to zero. 2) if the S&P500 goes down in price and then chops there endlessly without ever going down to the next buy level or going up to a level where I could exit in profit, and even then I'd still be getting paid dividends every so often so on an infinite time frame I'd eventually make my money back But yeah if either of those things happen then I'll lose money.

The goal is to get the biggest position with the lowest average price. Adding to winners is counterproductive to this strategy. I do not mind riding drawdown when a trade temporarily goes against me because it probably means I will be able to buy more shares at a better price. Those may be the same rules that the 95% of people who lose money follow. Does "crystallise" mean close out the position for a loss? "Investing" is just slower trading. I tend to think of "investing" as buying and not planning on selling for years. I sell my positions within days to months depending on what price does, so I personally don't quite define it as "investing." I wrote more about entries and exits in the other thread but if you have specific questions feel free to ask and I'll do my best to answer them.