Types of averages

Which average you like the most?

  • Normal

    Votes: 5 41.7%
  • Fibonacci

    Votes: 6 50.0%
  • 12345

    Votes: 1 8.3%
  • Cummulative

    Votes: 0 0.0%
  • Doubling

    Votes: 0 0.0%

  • Total voters
    12

columbus

Well-Known Member
#1
There are N types of Averages,with a name of its own.Example is illustrated
with Lots.

NORMAL: At each level one lot is added.
ex: 1+1+1+1+1.....

FABONACCi: Each level is summation previous last 2.
ex: 1+1+2+3+5.....

12345Fashion:At each level lots are added in 1,2,3,4,5,.....
ex: 1+2+3+4+5.....

CUMMULATIVE :At each level lots are added of previous ALL.
ex: 1+1+2+4+8.....

DOUBLING :At each level lots are added double the previous value.
ex: 1+2+4+8+16.....



A hypothetical example is taken to explain in a better way.

Normal:
HTML:
  1              1            1             1          1
5040           5020         5000         4980        4960
Average        5030         5020         5010        5000
Lots:5

Fabonacci:
HTML:
    1            1           2             3           5
5040           5020         5000         4980        4960
Average        5030         5015         5000        4983
Lots:12

12345:
HTML:
   1            2            3             4           5
5040           5020         5000         4980        4960
Average        5026         5013         5000        4987
Lots:15

Cummulative:
HTML:
 1              1           2            4            8
5040           5020         5000         4980        4960
Average        5030        5015          4998        4979
Lots:16

Doubling:
HTML:
  1             2             4           8           16
5040           5020         5000         4980        4960
Average        5026         5011         4994        4976
Lots:31

Risk Analysis:
The best Average Method is one which gives Good
Average Effect.(Closet to last value)Going by this
DOUBLING gives best results,but unfortunately one tends
to hold many lots. Therefore we have to consider this
along with Risk. An attempt has been made to put
into tabular form Effect(difference between last 2
values) & Risk (Lots*Effect)
HTML:
                   4times              3times          2times
                 Eff....Risk       Eff....Risk       Eff....Risk
Normal           40....200         30....120         20....60
Fibo             23.... 276        20....140         15....60
12345            27....405         20....200         13....78 
Cumm             19....304         18....144         15....60
Doub             16....496         14....210         11....77
Personally I will go for FIBONACCI. At lower orders
both Fibonacci & Cummulative are equal.
 
Last edited:

DanPickUp

Well-Known Member
#2
As my English is not so good:

Do you mean: Adding to a losing trade to average the loss?

Say: I invest a 100 R in one position.

Market moved down and I am in loss with 30 R.

I now will add on an other level an other position with a value of 70 R.

So I invested 170 R on two positions. 100 R plus 70 R = 170 R

I then have invested now in two positions with an average of 85 R.

Did I get that right with my English?

DanPickUp
 

columbus

Well-Known Member
#3
As my English is not so good:

Do you mean: Adding to a losing trade to average the loss?

Say: I invest a 100 R in one position.

Market moved down and I am in loss with 30 R.

I now will add on an other level an other position with a value of 70 R.

So I invested 170 R on two positions. 100 R plus 70 R = 170 R

I then have invested now in two positions with an average of 85 R.

Did I get that right with my English?

DanPickUp
Hi Dan,

Averaging without studying risk anlysis is a very dangerous.Averaging
a couple of times ,sometimes,beneficial.But one should keep in
mind the amount of time left for the close.Morning session is better for
averaging ,but not closing session.

This is when you are confident of recovery.Averaging is done when recovery
is expected ,otherwise book your losses quickly.
 
Last edited:

rajsumi121

Well-Known Member
#4
This is when you are confident of recovery.Averaging is done when recovery
is expected ,otherwise book your losses quickly.
__________________

Sir , jub koi trade karta hai , uss waqt bhi confident hota hi hai .. jub apka confident hona apki trade main kam nhi aaya to average karne main kam aayega ?????
 

columbus

Well-Known Member
#5
Sir , jub koi trade karta hai , uss waqt bhi confident hota hi hai .. jub apka confident hona apki trade main kam nhi aaya to average karne main kam aayega ?????
Averaging works sometimes ,but not always.Averaging once or twice
is OK,never keep on averaging.
 
Last edited:

columbus

Well-Known Member
#7
Yep. That is how the guy with UBS lost more than two billion SFR. He always was averaging until the loss was so big, that he had to give up.
DAN,

Yeah,averaging couple of times ,may be OK ,Sometimes.
With more times of Averaging ,the impact of averaging with come down,
and Risk will increse.
 
#8
i also avereged but when (or rarely) my individual stock down but not market ( sensex) . i mean sensex down very little or not down in comparison of my stock. also i conciderd what charts is sugusting and most , at what part of trading hour my stock go down. in market hours there is pataches (or time frame) when stocks & sector is having there lunch (consolidate). at that time i averaged. and also before averaging i search that any news or rumores are not flash circulate in market offcousres all are quickly trying to anticipatewithout wasting any time . becouse sensex and sector of particular stock are firm why it is reacting opposite. and few things also i conciderd or you say my trading brain.

http://www.thetradingdoctor.com/pdf/ThisIsYourBrainOnTrading.pdf

thanks,
 
Last edited:

columbus

Well-Known Member
#10
Though ,it is not a good idea to average always but Averaging once or twice is ok ,with
a view to square off within day.This is because .the more you average ,the more risk you
are taking ,with no appreciable reward.

 

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