Averaging in Forex.

There are many different trading tactics on Forex, including some quite dangerous ones, one of which is averaging. In some ways, this trading option is reminiscent of Martingale, but at the same time it has its own differences.

Averaging in Forex is a game against the trend in the hope of a quick reversal or a large correction.

When using this technique, the trader, despite current losses on existing positions, opens new ones for the same trading instrument and in the same direction. The essence of the technique is to equalize the financial result by concluding a second transaction at a more favorable price. For example, having bought one lot of euros at the rate of 1.2545, you received a loss of 10 points and the current price was 1.2535. If you open a new order at the existing rate, then if it grows by only 5 points (excluding spread ), both transactions can be closed with a zero result.

True, not all traders are guided by logical reasoning and expect a trend correction; most who use this technique trade haphazardly, simply insisting on their conclusions regarding the existing trend.

As a rule, it is the last category that ends up trading with the loss of the deposit and disappointment in trading.

The main reasons why they use averaging are lack of practical experience, errors in determining the trend, false hope for a quick trend reversal. In addition, another reason for using averaging in Forex is fluctuations in the direction of open positions.

For example, one long trade was opened with a loss of 15 points, but now it has begun to decrease and is already only 10 points. The trader begins to think that the price has followed the correct course and opens the next order. But, after a few minutes, the price begins to fall again and the loss on the first transaction is already 20 points, and on the second 10. At the same time, there are successful examples of using averaging, but in this case you should choose the right entry point when opening the next order. And figure out what is happening in the market: a reversal or a trend correction .

After you have determined the actual state of affairs, we find the nearest minimum or maximum price and open a deal. The tactic is quite simple; an example of its application is clearly visible in the figure below.

But even if all precautions are taken, most Forex professionals still advise not to use averaging in your trading, but rather to close the deal with a loss and conduct technical analysis .