Averaging Down Trading Strategy (How, Setup, Rules, Backtest, Returns)

Averaging down is a trading or investing method in which a stock owner buys more shares of a previously bought stock after the price has fallen. The main idea behind the average down technique is that it lowers the average purchase price, so when prices rise, it doesn’t take as much of an increase for the investor to start realizing a return on their investment.

The trading rules are simple:

1. We buy when the 5-day RSI is below 35

2. We sell when the close is higher than yesterday’s high

We get the equity curve shown below.

You can find more info about this trading strategy here:
https://www.quantifiedstrategies.com/averaging-down-trading-strategy/

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