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Average Down

Averaging down is a strategy traders use when they believe that a particular currency pair will rebound after a decline. For example, if a trader initially bought USD/JPY at 140.00 and the price falls to 139.00, they buy more of the currency pair at the lower price. By doing this, the trader lowers the position's average entry price, in this case, to 139.50 when the quantity is the same at each level.

Average down profitability

Averaging down can be profitable in range trading markets, but a stop-loss order is always required to prevent losses in a downtrend. Understanding the underlying factors driving currency values will improve your profitability using this strategy.

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