Practical Classroom-------Inverted Pyramid Buying Strategy

The inverted pyramid buying strategy is a common way to buy in batches, especially when asset prices are falling. It helps to lower the average purchase cost and reduce risk. The main feature of this strategy is that as prices decline, the amount of capital invested gradually increases, resembling an upside-down pyramid shape.

Operational Steps:

1. Initial Purchase: Buy a small amount when the price is relatively high, maintain a wait-and-see attitude, and avoid entering the market with a full position too early.

2. Increase Purchase Amount as Prices Fall: As prices continue to drop, buy again, but this time the amount of capital increases compared to the first purchase. Each time the capital added will be larger than the previous one, reducing the average cost.

3. Continue to Buy in Batches: Continue to increase the purchase amount with each price drop until the predetermined investment plan is completed or the market price rebounds.

Advantages of Inverted Pyramid Buying:

• Averaging Costs: By gradually increasing the purchase amount across different price ranges, it can average out investment costs and reduce the risks of a one-time purchase.

• Capitalizing on Market Fluctuations: In a declining market, buying more when prices are lower provides an opportunity for greater returns when the market rebounds.

• Avoiding Greed: Setting clear buying rules helps investors avoid emotional trading.

Risks of Inverted Pyramid Buying:

• Risk of Continuous Market Decline: If the market continues to decline without rebounding, it may lead to buying more as prices fall, ultimately resulting in too high a cost to be profitable.

• Need for Sufficient Funds: As the amount purchased gradually increases, sufficient capital reserves are required to support this strategy; otherwise, it may lead to a cash flow crisis.

In summary, the inverted pyramid buying strategy is suitable for investors who have a certain level of market analysis capability and are willing to bear significant market fluctuations. When using this strategy, investors should consider their own financial situation and risk tolerance, and reasonably set buying ratios and capital allocation.

Finally, don’t forget to follow. Help you get rich in a bull market; your attention is my motivation for creation.