Averaging Down as an Investment Strategy in Crypto Asset

Digiasset News Sep 27, 2022

Average down is one of the investment strategies used by investors to deal with down market conditions to estimate the gain that can still be obtained from their assets.

Average down is a situation when investors buy assets gradually when the price is falling. When prices are down, investors buy more to minimize losses. Average down is a strategy used by investors to reduce the percentage of losses or increase the percentage of profits. So this strategy is suitable for long-term goals.

The average down strategies of course using the investor's analytical considerations, first the investor knows whether drop of the price of crypto assets that occurs is only temporary or not through fundamental analysis. One of them is that investors can analyze based on the market cap at CMC. If Investor estimate the downtrend is only temporary and will rise again so that it has the potential to earn profits in the future.

How to calculate average down refers to different prices on the same crypto asset. Investors must carefully when calculations risk per trade. First, the maximum amount to buy  a crypto asset. Then it will be divided into how many times to entry the market and how much amount or ratio in each trades.

There are no absolute rules when investors should average down in crypto asset. Everything based on the analysis of investor himself.  In technical analysis, investors can find out the possible direction of crypto asset price movements in the future through reading certain indicators or based on patterns formed on crypto asset price charts for example bullish reversal pattern on candlesticks, moving average indicators, support resistance etc.

Here is just an example of investor buying MATIC/IDR assets and averaging down by making three times trade. The first trade is IDR 13,355 for amount 5 coins (blue mark), then the second trade is IDR 9,372 for amount 10 coins (orange mark) and the last trade is IDR 5,198 for amount 15 coins (purple mark). The reason for entry in market here is just an example. You can do your research, for example using your favorite technical analysis and then for the amount ratio of accumulative trades according to your risk profile.

Then to take profit this investor sells MATIC/IDR at the price when he bought it at the first price (IDR 13,355) . So the result calculates that investor gets a value of profit 51.5 coins from accumulation of three trades.

The advantage of using this average down calculation system is that investors can freely increase their investment so that they get the average and get the maximum profit. While the weakness of using this calculation system when the price of crypto assets continues to fall, investors can get greater losses. So before using this strategy, first make sure that money management will be applied. This calculation system will be suitable to be applied to long-term investments. Keep do your own research before investing.

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