Quote:
Originally Posted by lycan  lol
Traders who use stop losses are selling their losing positions to traders who actually know how to turn them, on average, into winning positions. If such traders did not exist and had lots and lots of cash to finance their trades, markets would crash constantly. Every trade has two sides, by definition. Both sides always believe they are right. If there is not someone who disagrees with your stop loss, it is useless. If there is, maybe you need to rethink your trade. |
Here's a basic question: if you refuse to sell at a loss, and instead average down, what happens in the event the price of the security (or FX pair or derivitive) you're trading goes to zero?
Answer: you lose everything.
Averaging down produces only the illusion of profits - long strings of marginally profitable trades followed by one huge blowup. It's like a reverse lottery for the misinformed.