Position averaging is a method of opening a trade in several parts to keep a proportional ratio between risk and take profit.
How is the average price calculated?
Let’s consider the example of SOLUSDT quotes
The user configures the bot with a grid of 1.8% (taking into account the indent of 0.2%) with the expectation that the price will fall.
The first order will open at the price of 22.039 with the volume of 6 SOLs
The second order at the price of 22.259, also at 6 SOL
The third order at the price of 22.457 with a volume of 8 SOL
The average entry point for a volume of 20 SOL in this trade will be 22.270
How to close a deal?
When closing a position, as in the case of opening, it is recommended to use multi-takes, with the help of which you can pull out the largest movement.
The first limit order will close when the price passes 2%, the position will be unloaded by half. The remaining two orders with volumes of 25% each will lock in profit when the price reaches 3% and 4% correspondingly.
In the case of execution of all the takes, the average profit will also be calculated, which will be 3% PnL.
How does it calculate the stop loss?
Stop-loss is placed from the last order in the grid and is set as a percentage. It is important to maintain a risk to profit ratio of at least 1k2. In this case, taking into consideration the calculation of the movement potential, the stop loss will be 0.3%, which will amount to 1.2% of the loss from the allocated deposit.
Where to find the average price on the Veles platform
The average price and total volume are shown below the preview chart. After the bot has entered a position in the “Deals” section, the average entry price will also be shown below the chart.
Averaging with Martingale and Logarithm
Martingale – increases the volume of each following order in the grid and reallocates it so that the previous orders are smaller in volume.
With this tool trades are executed faster because a smaller price bounce is needed to close a position.
Logarithm – orders at the beginning of the grid are placed more densely and the distance between orders increases with each executed limit. Due to the fact that the number of orders at the beginning of the grid is larger, the full volume of the position is loaded faster. After the execution of the first orders, the price needs to make a bigger movement to average the position and then to reach the take profit.
Manual position averaging – this option gives you flexibility in managing your trading operations and allows the bot to adapt to changing market conditions.
You can use this feature when the trading grid has ended or when there is a need to add volume before the grid is fully executed.