For this example I will use a nice round figure of $2,000 to illustrate how I would take a trade. I operate on the basis of being 100% wrong every time with the intention to add to my position and so my first position would be around $200-$400 (1-2 contracts dep on price)

Using a combination of Supply & Demand &/or Fibonacci (depending on how far out I am playing) to draw my levels I have a general idea of the levels I plan to enter (& add at) - Operating on the assumption that I will be wrong, I will not simply add on every single miniscule dip.

My first add is within a threshold of (minus) 33-50% meaning my $200 position is now worth $100 so an equal $200 add is now DOUBLE the average manipulation. if my average was $1 and I added at .50 with 2x - my new average would be .667 approx.

The key with this strategy is to never use the entire allocated portion all at once in the event that I miscalculated or an event in the market went against me. By always having backup cash and hugging as close to the bottom as I can, the trade efficiency is maximized.

If I actually got it right on the first try and the position simply climbs, I either take my profits and move on happily or add on strength (if I have much more time - this is usually for LEAP positions that are up 100+%). If not however, I am maximizing my one trade with more $.

The key for me is not to perform a hundred trades a day and scalp positions, it is to perform 1-3 good trades with as good a price as possible without breaking my maximum trade allocation rules.

I would much rather prefer to hit one damn good trade that flies with as good a price closest to the bottom as possible with more money than to have to scalp a few % & work my ass off all day hunting different positions/new opportunities (thats what scanners + software is for)

Very rarely does the market simply plunge in one direction and even if the trend has shifted there are always some kind of mild bounce (even if simply to now head lower). Typically these range from 33% to 50% from my observations to whatever the trend direction is.

Continuing on the $2000 example my new average is .667 and I have used up $300 of my $2000 maximum allocation but hey, the option keeps on plunging - My position is even lower now at .33 (I have lost another 50%) & I have used up $300 as we approach my next line.

Now rather than to simple add at my line, I wait for more of a confirmation (have we bounced off a demand level with increased volume and an engulfing pattern?) if yes, time to add! I am now adding 4x the contracts with $600 at .33 - my new average is .39 w 15 contracts.

The move I was expecting at first now happens and we soar up 50% from there - the option is now at .49 and I have $900 of my $2,000 maximum trade allocation and I am now up 25%. Time to trim some profits and remove the risk (or close the trade if the trend has shifted).

Now you may be wondering....Damian wtf - How can you just keep adding contracts - which brings us to what I look for when performing these trades - Sufficient Open Interest AND even more importantly VOLUME (LIQUIDITY) - Very rarely do you see me play some 12 volume 400 O.I plays.

This is a method that has taken me time to perfect and even now it must always be refined and adapted to current market conditions (like any good strategy).

A WARNING* - For smaller accounts - do not blow up your account trying to emulate this method as the whole point of the "maximum position allocation" is the fact I am only risking a smaller percentage of my account that I am comfortable with potentially losing if I am wrong.

@ChartShark28 Do you find this is more or less effective with individual stonks compared to indices?

@HighArchmage I haven’t seen a different for either to be honest - it’s essentially my method for like 90% of my trading.

@ChartShark13 Do you use this predominantly long, it seems risky for shorts?

@desgrippes Use the same strategy for puts, in general though 9/10 times my puts have sufficient time on them so thT this DCA method can work best

@ChartShark28 @threadreaderapp unroll plz

@ChartShark22 Thank you for this! It is such a useful method. When I've made big mistakes it's when I go all in, and try to "time" the market. It NEVER works. I'm trying this strategy now, and love your idea to just assume I'm getting in too high.