Views on "More Coverage as Prices Fall"

1. Theoretical Basis:

Average Cost Method: When prices fall, covering your positions can indeed reduce your average cost price. This theoretically allows you to recover your investment faster and make a profit when the market rebounds. This strategy may be effective on stable, long-term bullish assets.

2. Actual Risks:

Insufficient Ammunition: The covering strategy requires you to have sufficient capital reserves. The market does not always rebound as you expect, and continued declines may cause your funds to dry up. In the end, you may find that your funds have been exhausted before the rebound.

Risk of a Bottomless Pit: In extreme cases, the market may experience a long-term downward trend. For example, during the 2022 bear market, many cryptocurrencies fell sharply in price and showed no obvious signs of recovery. If you keep covering your positions, you may fall into a "bottomless pit" and end up with heavy losses.

3. Investment Psychology:

Increased Psychological Pressure: As the market continues to fall, your losses will continue to increase, and psychological pressure will also increase. This may lead to emotional decisions, further amplifying losses. During the covering process, if the market does not rebound as expected, you may doubt your strategy and even be forced to sell at a low point.