When you looked at previous trades, most of them were hold for very short amount of time, and most of them are profitable. But all of sudden, the developer let a high leveraged trade hanging there for days, then crashed. This is what I saw from index1 or index2 too. Unable to explain why this happened.
I am relatively new here, but feel this thing is quite common for those high leveraged future strategy. Short trades profitable, one day, leave trade hanging there for long…
Anyone can explain what behind this?
@TomShie2, as you can see he had 28 contracts of crude oil but he didn’t start off trading all 28 at once. He averaged down as shown below.
He started with 5 contracts then added each time the market went down. Eventually he closed the trade when it went either towards his stop level or his mental stop. He does manage to sell some contracts at a profit but he was still on the long side heavily so eventually he just closed them at a loss.
This process occurred with every one of his trades probably. On many occasions early the market bounced and he came out with a profit. When the market does not bounce and continues its trend then he loses bigger and bigger.
This method is called averaging down and in some cases called martingale.
Beware these types of systems as its extremely hard to manage and can potentially wipe out accounts if not managed properly.
Hope this helps clarify the averaging down method.
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Thanks a lot. This makes a lot of sense… I have subscribed quite some futures trading strategies, had bad experiences at the end with all of them. Now only keep two CStar strategies. But they hardly trade once across a week. So sad that is so hard to find a reasonable one on c2…
IMHO futures and forex strategies tend to be most prone to leveraging up too much and crashing. IMHO it is best to start slow with IRA friendly strategies. Obviously, I am biased and have a horse in the race since I run an IRA friendly strategy, but how many IRA friendly strategies have had 80% drawdowns or more suddenly. Maybe there is one out there that put everything in one stock or something, but that seems like an obviously bad idea.
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