Risk control plays an important role in shaping the future financial results. The existence of a trading strategy alone does not guarantee a positive financial result; therefore, it is necessary to develop additional effective parameters for managing the capital.
Averaging is also highlighted among the possible options for risk control as a non-standard option for risk and money management. I do not recommend to use this type as a basis for risk control, but nevertheless it will allow you to get out of the drawdown on a specific financial asset by opening additional transactions in the direction of a losing transaction. To do this, you need to understand the levels and logic of its work.
If we consider the example more specifically, then the averaging is used in the event that the trader has a loss on the transaction and in order not to close the loss and not to fix the position, he opens another deal in the same direction. Thus, he adds more volume to the unprofitable position and brings the break-even point closer to it. For example, when a trader has a loss on the EURGBP currency pair of 50 points and he predicts a spread of quotations to the previously opened side, he makes an additional deal in the same direction. Thus, the break-even point will be divided by two. When the quote demonstrates the dynamics of 25 points in the right direction, the fix api trader can close both deals: the first with a loss of 25 points, and the second with a profit of 25 points.