Why should you never average down a losing pair trade? 📉
🔹 Averaging down means adding to a position that is in the red to "improve the average price".
🔹 In pair trading, you are increasing your bet on something that has just stopped working.
🔹 If the connection between coins breaks, you invest money into a mistake instead of fixing it.
🔹 If divergence continues, your overall losses grow faster along with your liquidation risk.
For example: if a pair is down 3% and you double both legs, continuing spread divergence will make your loss grow roughly twice as fast.
Typical mistake: adding to the pair because "now the spread is even more favorable."
Why is averaging a pair trade more dangerous than averaging a regular position?
#Futures #CryptoTrading #CryptoEducation #RiskManagement
🔹 Averaging down means adding to a position that is in the red to "improve the average price".
🔹 In pair trading, you are increasing your bet on something that has just stopped working.
🔹 If the connection between coins breaks, you invest money into a mistake instead of fixing it.
🔹 If divergence continues, your overall losses grow faster along with your liquidation risk.
For example: if a pair is down 3% and you double both legs, continuing spread divergence will make your loss grow roughly twice as fast.
Typical mistake: adding to the pair because "now the spread is even more favorable."
Why is averaging a pair trade more dangerous than averaging a regular position?
#Futures #CryptoTrading #CryptoEducation #RiskManagement