Layered Dollar-Cost Averaging with Escalating Safety Orders

Summary

This long-only DCA system starts with a fixed-amount purchase, then adds safety orders when price falls by a specified percentage from the latest entry. Each successive order grows by a configurable multiplier, while the strategy tracks aggregate cost and quantity to estimate average entry. It exits the whole position when price reaches a take-profit level above that average, then resets its tracking variables for another cycle.

The document gives adjustable inputs for order size, trigger deviation, maximum additions, multiplier, and profit target, and includes code implementing the cycle. It describes no measured performance results. Its own risk analysis notes that repeated buying can consume capital during persistent declines, and that the design has no stop loss or trend filter. Parameter sensitivity and liquidity or slippage concerns are also raised; suggestions such as volatility-based spacing, partial exits, and loss limits are proposals rather than tested improvements.

Key ideas

• The strategy begins with a fixed quote-currency purchase and adds to the long position after preset price declines.
• Safety order size increases geometrically according to a configurable multiplier and the number of prior additions.
• The exit target is calculated from the tracked average entry price, and the cycle resets after closing the position.
• There is no stop-loss or trend-recognition rule in the described implementation.
• Persistent declines can exhaust available capital, while large orders in illiquid markets can face execution problems.

Tags

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