This is just my opinion on averaging down – which appears to be a popular crypto strategy.
My opinion applies to trading stocks, but I believe averaging down should be carefully considered in any market.
While I have little experience or knowledge in the alt coin market I wanted to share my thoughts.
I have to strongly recommend against averaging down.
Averaging down is when you buy BELOW your original entry price.
Compounding is when you buy ABOVE your original entry price.
Averaging down on cryptos – which have little to no value – goes against our advice on capital preservation.
I had not started trading when the DotCom bubble was occurring, but the crypto market right now appears to be very similar.
There are a few which have a real-world use and have been monetarized, but most (like the DotComs) have nothing more than an idea.
We should learn from history, not repeat it.
A very successful fund manager recently revealed that they kept one of their DotCom stocks in their portfolio just to remind them that sometimes stocks NEVER recover. 20 years later it is still trading at a fraction of what they paid for it.
For an enjoyable way to learn of the dangers of averaging down, I recommend anyone who has not seen the movie Rogue Trader (1999) to watch it.
Let’s go trade!