Oh yeah, really. You'll love it @Nordine13 đ
1) Why adopt this purchasing strategy?
Through market depth analysis, you learn to spot good assets, anticipate price reversals and effectively position your buy and sell orders.
However, this reading only takes into account visible orders, i.e. those declared in the order book. It does not allow us to anticipate unpredictable movements linked to macroeconomics, regulatory changes or news, whether good or bad.
An artificial intelligence could analyze all these factors in real time and adjust its strategy accordingly, but as humans, we must find a simple and effective way to limit these uncertainties.
Geometric progression purchasing is a solution that allows:
â to reduce the impact of unpredictable movements,
â to take advantage of a sudden drop in price after our purchase,
â to optimize our market exposure by distributing our entries intelligently.
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2) How to buy in geometric progression?
a) Build a smart price scale
The key step is to define a price scale from the lowest level, unlikely but possible, to a higher price where the purchase is safer (or even up to the current price if you want to start immediately).
To build this ladder:
1ïžâŁ We identify the historic low and key supports at different time scales.
2ïžâŁ We analyze the depth of the market and identify the levels where âgreen cliffsâ form, i.e. areas of high demand.
3ïžâŁ We mix this information to obtain a series of relevant prices, taking into account both history and pending orders.
đ Example: We can apply this technique together on an asset of your choice if you want.
b) Distribute your capital over these prices
Letâs say you have $10,000 to invest. Rather than buying all at once, youâll spread that amount out geometrically:
1st order (lowest price): USD 5,000
2nd Order (Top Level): USD 2,500
3rd order: 1,250 USD
4th order: 625 USD
...and so on until your last purchase price.
As with each descending level, the quantity purchased doubles, the average acquisition price mechanically falls and market falls are better cushioned.
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3) What are the advantages?
đč Better resistance to declines
If the price drops after your first purchase, you don't immediately suffer a net loss because you continue to buy larger quantities at lower levels.
đč Capital (almost) invariant to the decline
Thanks to the geometric progression of reason 2, each new purchase corresponds to approximately half of the capital remaining to be invested and, more significantly, to almost all of what has already been invested (except in the early stages, where the difference remains notable).
Result: in the event of a sudden drop in assets, your overall capital remains relatively stable, with the exception of the differences between two levels of the scale.
đč Multiplication of gains on rebound
As soon as the price rises back to your highest buy level (or beyond), the tranches purchased at low prices generate a natural leverage effect on your profits.
đč Securing the strategy with integrated coverage
The lowest buy orders serve as a safety net in case the market falls again. As long as you havenât sold, donât cancel them: they protect your capital against further declines.
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4) What are the disadvantages?
â ïž 1. Need a substantial capital to follow the full progression
If your capital is limited, you will not be able to fill all the rungs of your ladder. You will therefore have to select a few strategic levels, which requires more careful thinking.
â ïž 2. Immobilization of part of the capital
Until the price drops significantly, most of your capital remains tied up in unfilled orders. In the meantime, this money could be invested elsewhere or placed in earn (e.g. at over 10% per year on USDC).
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5) How to optimize the sale to maximize profits?
We have seen how to buy intelligently, but how to resell in the best way?
Several strategies exist:
Sale in arithmetic progression (fixed portions are resold at regular price intervals).
Selling in inverse geometric progression (we sell half of what we own at each level of increase).
Selling in fixed levels (we wait for the price to reach a certain target before liquidating all or part of the position).
đ€ Which method would you personally choose?
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Conclusion
Geometric progression buying is a powerful technique that allows:
â to limit the impact of unpredictable market movements,
â to take advantage of price drops instead of suffering them,
â to maximize gains during rebounds.
However, it requires good capital management and thought about the exit strategy.
If you want us to apply this method together on a concrete example, tell me on which asset you would like to test this approach! đ