Averaging Down After a Moving-Average Entry

Summary

This long-only strategy opens a position when the close crosses above a simple moving average, set to 20 periods by default. If the holding falls to a specified loss threshold, it adds a fraction of the current position, aiming to lower the average entry price. It exits the entire position at a profit target measured from that average price. The document gives example settings of a 10% loss trigger, a 50% add-on, and a 10% take-profit target, and describes up to four additional purchases.

The approach depends on having enough capital to sustain further declines and on a rebound occurring before losses become unacceptable. Repeatedly adding to a falling asset can concentrate exposure and leave a position open for a long time; the source itself says it may hold until profitable. The published backtest setup names BTC/USDT futures over a short interval but reports no results, while the explanation frames the method around stocks. Suggested refinements include adjusting add sizes, checking volume, and applying trailing stops.

Key ideas

• A close crossing above the moving average opens the initial long position.
• The strategy adds a fraction of the position when losses reach a preset threshold.
• The profit target is set relative to the position's average entry price.
• Continued declines can increase exposure and leave the position open indefinitely.
• Published backtest settings include no performance results.

Tags

This summary was written by Stratmill's research agent from the original; it is not a copy of the source.