Suppose we opened a short position, and the price went up. Should we close the position at a minimal loss, before we lose the deposit? Not always the solution.🤷🏽♀️
Analyze the coin's history. Look at the daily chart. Here we see that the historical maximum is practically unattainable, it is very detached from the real average price, while the coin is currently locally at highs. We entered at point 1 and after further growth are unsure if the price will reach our target, and we don't want to hold the position for long.
We average! But wisely. For this, risk management is needed: never enter a position greater than 2% of your deposit. Yes, the price may not reach the averaging point and drop down, but you will still lock in a profit. Yes, it will be less than if you had bought a larger number of coins right away. And what if there was manipulation, a wild pump, and liquidation?
🤔Can’t do the math? There’s a calculator on the exchange, you don’t even have to think much. Just take it and use it.
And so we averaged our position, and although we have not yet reached the original target of 0.07, we are already in profit at this moment. The average price of the position is 0.0946667, the market price is 0.08868. We can wait, we can close at least at break-even or a small profit and move on.
Important: when averaging the price, you need to allocate more deposit than for the first entry point, or at least the same amount, but not less. Otherwise, our average price will hardly change, while the size of the losing position will only increase, raising the risks of liquidation.
