Why averaging down is not the same as reducing risk
Each time you buy lower, your average entry drops — and that feels like progress. But a lower average is just a lower break-even, not profit, and you're holding a bigger position into a falling market. With a size multiplier (the martingale pattern), the capital each level needs grows geometrically: a few 2× steps and the next buy is larger than everything before it combined. Run out of capital before the bounce and the whole position is underwater with no ammo left.
This is the same point as our DCA reality check and the DCA illusion article: judge a position by realized P/L, not by how good the average looks. Two honest guardrails — decide the number of buys in advance, and size so the full plan fits your account.
FAQ
Is DCA bad? No — scheduled DCA into something you believe in, with money you won't need, is reasonable. The danger is the emotional version: averaging down on a bleeding position and calling the falling average a win.