Dilution Strategy

This strategy is based on the principle that after the initial entry point, the bot does not buy again at every price retracement but only if the price is significantly lower than the previous entry level. This helps reduce the average entry price and optimizes risk management. 

How Does This Strategy Work? 

1. Initial Purchase – The bot enters the market when a predefined condition is met (e.g., RSI, moving averages, or other indicators). 
2. Additional Purchases Only on Price Drops – The bot does not buy again at the same price level or slightly below it. Instead, it only buys if the price has dropped by a certain percentage (e.g., -3%, -5%) compared to the previous entry. 
3. Further Dilution Levels – The bot continues to buy only at lower price levels, for example, at every additional 5% drop. 
4. Reducing the Average Entry Price – Since new purchases occur only at lower prices, the average entry price decreases, meaning less price recovery is needed to reach profitability. 
5. Exit Strategy – The bot can sell at a predefined take-profit level or based on other indicators (e.g., RSI, moving averages). 

Advantages and Disadvantages 

Advantages: 

More efficient capital utilization – The bot avoids unnecessary purchases at the same price levels. 

Lower average entry price – Since the bot only buys at lower levels, the average price gradually decreases. 

Fully automated – Tradensea bots can be configured to follow this strategy. 

Disadvantages: 

Can be capital-intensive – If the price continues to fall, more capital may be required for further purchases. 

Missed re-entry opportunities – If the price does not drop enough, the bot will not buy again, potentially leading to a smaller position size. 

How to Use It on Tradensea? 

This feature is available in the Signal Bot and RSI Bot. 

How It Works: 

1. First Purchase – The bot buys at a predefined level based on an indicator (e.g., RSI or another technical signal). 
2. Re-entry Only at Lower Prices – If the price moves up and then returns to the previous entry level (and the indicator conditions are met again), the bot will not buy at the same price level. 
3. Dilution by a Set Percentage – The bot will only buy again at a predefined percentage lower than the previous entry, ensuring the best possible average price. 
4. Automated Process – This strategy minimizes premature or unfavorable re-entries while continuously optimizing the average entry price. 

Key Benefits: 

• Ensures that re-entries occur only at better price levels. 
• Optimizes the average entry price. 
• Fully automated with Tradensea bots.