Optimizing Trading Strategies: "Smart Averaging" in Automated Trading

Traditional Averaging Approach:
In the traditional averaging approach, orders are placed based on fixed percentages of the initial order price (e.g., activating averaging when the price falls by 5%). However, in rapidly changing market dynamics, this method may prove ineffective:

• It forces traders to tie up a significant amount of capital in case of increased market volatility or a more substantial decline than initially planned by the strategy.
• Under normal circumstances, this reserve is not used for trading, reducing overall profitability.
• Traders are compelled to add funds during a declining market or close some trades at a loss to free up capital for further averaging.
• Each subsequent averaging has a diminishing impact on the average asset price.

Advantages of "Smart Averaging":

1. Strategic Safety Placement: "Smart Averaging" is strategically activated after significant changes in market dynamics, such as the formation of a new local level or a trend change, allowing adaptation to new conditions.
2. Preventing Unnecessary Safety Placements: Unlike traditional fixed-step averaging, which can lead to unnecessary placements during significant price fluctuations, "Smart Averaging" is strategically activated. This avoids over-investing during periods of high volatility, increasing strategy efficiency as each averaging makes less significant changes to the average price.
3. Flexibility in Risk Management: Due to strategic averaging, risks are reduced, providing more flexibility in portfolio management. Traders can increase the number of trading pairs and use a larger portion of capital in active trading.

How It Works:

1. Detection of Significant Changes: "Smart Averaging" responds to major changes in market dynamics, such as a trend shift or the establishment of new support levels.
2. Precise and Flexible Averaging: "Smart Averaging" places additional orders precisely and flexibly, adapting to new market conditions.

Benefits for Traders:

• Flexibility and Simplicity in Risk Management: "Smart Averaging" makes risk management more flexible and straightforward.
• Adaptation to New Trends: The feature helps rapidly respond to new trends, activating averaging only during significant changes.
• Risk Reduction during Minimal Price Fluctuations: "Smart Averaging" avoids excessive placements during minor price fluctuations. This strategy allows traders to actively utilize a larger portion of capital, positively impacting final results.

"Smart Averaging" represents an innovative risk management method, providing a more precise and flexible tool for optimizing trading strategies. Its use in our automated trading system ensures more efficient risk management and the achievement of trading goals.

Intrigued by smart averaging? Check out how it works in practice!