I have an issue with forex cost averaging systems (double down). I understand this is done to make up from a losing trade. It is easier to add to the position while down so you can get a profitable trade at a lower exit. While this works most of the time it really adds a whole new dimension of risk every time is implemented. I know that by setting a limit to the max number of lots during the auto-trade setup, I can prevent this, but there is no way to automatically close the trade so the subscriber does not incur additional losses. Here is an example:
Setup: Trade 100% and max lots = 3
Entry Signal: Buy 1 lot - Subscriber buys 1 lot
Entry Signal: Buy 2 lots - Subscriber buys 2 additional lots
Now the subscriber has 3 lots for that trade and can’t add anymore due to the auto-trading restrains. If the recovery does not happen, the owner my execute an additional entry signal (another double down). Here is were the problem comes in. I simply want to take a loss and get out automatically.
So the logic is easy, simple set a "close positions if the max lots restrain has been exceeded"
So if the owner sends “Buy 3 additional lots” for a total of 6 lots, simply close the trade. This would a great way to control cost averaging without manual intervention.
Let us know if this can be implemented. I think it can benefit the subscribers greatly and not be afraid of subscribing to systems that constantly use this technique.
Truthfully, it’s unlikely we’ll implement that feature in the near future.
I’m uncertain about the proposal’s benefit, and all new autotrading personalization features add risk and complexity.
First, let me state the obvious: The simplest way to avoid having a system average down in your account is to not subscribe to those kinds of systems in the first place.
Further, you can mitigate some of the averaging-down risk by using personalization features already available to Gen3 AutoTraders: If you want to exit positions automatically at a certain dollar-loss, you can use our personalized auto-stop loss feature*. If you want to exit a trade early, you can use our manual position adjustment.
I understand these suggestions are not exactly what you are proposing, and that you are asking for something a bit different (the ability to automatically close a position when the number of contracts reaches a pre-defined threshold.)
As it stands now, though, I’m not really convinced that this feature will hold a lot of appeal to a lot of C2 users. (Not enough appeal to outweigh the additional risks and complexity, anyway.)
But I’ll certainly keep it in mind. If other users propose similar features over the upcoming weeks and months, I’ll reconsider. And, as always, I appreciate it when C2 members take the time to write thoughtful and considered feature requests, as you have done.
* Important information about “stop losses”: Remember that stop losses may not limit your losses in all market conditions.
Thanks for the response and considering the idea. I try to stay away from cost-averaging system if possible and I have asked owners if they are willing to start a new system without cost-averaging. If it is implemented, I will use it, hopefully more people show interest.