The Math Behind Scaling into Your Investment Positions

So yesterday I posted about scaling into your position to lower your risk profile and potentially increase your profits.

Scaling into a position means that you're buying your positions slowly over time so that you can average the price that you get in to a stock or crypto... By doing this, you're able to mitigate the possibility of the crypto or stock going down the day after you buy it (assuming you bought all at once).

If you buy slowly over time, then you get the average of each time you buy in!

I figured that this could be a little confusing for some, so I decided to put some numbers behind this example:

Imagine that your plan is to buy 1000 STEEM and you decide to buy it over a 4 week period of time:

1. During week 1, you see the price hovering between $2.10-$2.30. You buy 1/4 of your position (250 STEEM) at $2.15
2. During week 2, the price has gone up slightly to $2.50 and you buy another 1/4 (250 STEEM) at $2.50. The average price of the 500 STEEM that you've bought thusfar is $2.325.
3. During week 3, the price has come down quite a bit to $1.90. You buy another 1/4 (250 STEEM) at $1.90. The average of the 750 STEEM that you've bought thusfar is now $2.183
4. The markets have steadied and the price is still sitting at $1.90 and you decide to buy another 1/4 (250 STEEM) at $1.90.

The final average for the 1000 STEEM that you've bought over this 4 week period of time is $2.11.

As you can tell, if you would have bought all your position at week 1, you would've ended up with a slightly higher buy-in price.

If you would've bought during week 2, then you would've gotten a much higher buy-in price.

Buying in weeks 3 and 4 would've given you the best advantage, but nobody can predict markets perfectly. There is no way to know when the "best" buying opportunity is. For this reason, averaging into positions is the most sure-fired way of getting a good buy-in price.