Although this strategy is considered to be simple and one of the best strategies that medium-term or long-term investors could apply based on the results it presents in the digital currency trading, it requires fine handling, timing and well-calculated moves from them.
In summary, Averaging Down Strategy is the trading strategy based on the average price of a series of successive purchases of a coin.
The general view and the underlying basis on which this strategy is based is that trading is not static, it is not something that begins with a specific purchase that should end with a directly related sale but something dynamic, a series of purchases that lead to a series of sales for making profits.
Although the reasons why this strategy is used by investors are purely defensive, tactics are aggressive. We will see later that apart from the tactics, even the reasons can become aggressive.
The key prerequisites for a successful outcome of this tactic are:
• A long-term horizon (Long Term Traders and not Day Traders).
• To check that the cause of a possible large fall in the price of the coin of interest is not fundamental.
• Commitment to the fact that the investment cost will not be limited to a single purchase of a coin at a certain price but will be extended to a series of successive purchases at different prices.
• To set from the beginning the profit we want to make.