Averaging
Averaging is a position management tool that adds new orders to an already open position at different price levels. As a result, the positionβs average entry price changes.
Averaging setup in the web terminal
A Smart Trade starts with placing a regular buy or sell order or clicking the Β«βΒ» button next to an asset in the mini-portfolio; after confirmation, the trade appears in the active trades list.
Configure averaging settings in the trade window. To open the trade window, click the trading pair name or the pencil icon in the active trades list.
To add volume to an already open position, use:
+Buy β for long trades;
+Sell β for short trades.
Specify the price and coin quantity for adding to the current position; changes take effect after clicking Save.
Position planning
The averaging mechanics assume a predefined plan:
a price range for building the position;
price steps (position building levels);
volume for each order;
target Take Profit levels;
the Stop Loss level relative to the average entry price.
The average entry price serves as the reference point for calculating the planned profit (Take Profit) and acceptable risk (Stop Loss).
Averaging example
This example uses the BTC/USDT trading pair.
Three limit buy orders form the position:
0.00553 BTC at 90400 USDT;
0.006 BTC at 89500 USDT;
0.007 BTC at 88600 USDT.
The total position size is 0.01853 BTC.
The average entry price after averaging is 89428.6 USDT (calculated automatically).
The example uses a Stop Loss level at 88490 USDT below all buy orders.
A single Take Profit level at 96000 USDT is set for the position.
The trade result field shows the calculated potential profit when the specified position parameters are reached. When the cursor hovers over the result field, a tooltip displays the calculated final profit after all averaging orders execute.
Average entry price calculation
The average entry price calculation uses the following formula:
P_avg = (P1 Γ V1 + P2 Γ V2 + P3 Γ V3) / (V1 + V2 + V3)
where:
P_avg β average entry price of the position;
P1 β price of the first order;
V1 β volume of the first order;
P2 β price of the second order;
V2 β volume of the second order;
P3 β price of the third order;
V3 β volume of the third order.
In the example above:
Orders:
90400 USDT Γ 0.00553 BTC;
89500 USDT Γ 0.006 BTC;
88600 USDT Γ 0.007 BTC.
Total volume:
0.00553 + 0.006 + 0.007 = 0.01853 BTC.
Total cost:
90400 Γ 0.00553 + 89500 Γ 0.006 + 88600 Γ 0.007 = 499.912 + 537 + 620.2 = 1657.112 USDT.
Average entry price:
P_avg = 1657.112 / 0.01853 β 89428.6 USDT.
Risks of averaging
Uncontrolled averaging of losing positions is one of the common causes of significant losses.
Instead of limiting loss on a losing trade, the position is often increased in expectation of a price reversal. During a prolonged move against the position, this can lead to substantial losses up to a complete loss of the deposit.
Strategies that use averaging are reasonable only for assets where a long-term growth scenario is assumed and there is a justified logic for building a position at several price levels.
Setting a Stop Loss makes it possible to limit the potential loss for the entire trade. When using averaging, the Stop Loss level is placed beyond the outer averaging level:
for long trades, Stop Loss is placed below all buy orders;
for short trades, Stop Loss is placed above all sell orders.
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