Double Down Trading Strategy — Concept and Backtest Findings

A trader in a losing stock position has only a few options: they can close the trade at a loss and look for opportunities elsewhere; they can hold the losing position for a while and hope that the price will turn around and get to their entry price, which may take a long time if it happens at all; or they could decide to use the double-down strategy. What does the double down trading strategy entail?

The double-down strategy is a stock trading strategy that entails adding another position to a losing trade, with the hope that the reversal will help you recover your losses. It involves doubling your position when the stock price falls in order to improve your average order entry price.

In this article, we show in backtests when a double down trading strategy works or not works. Let’s go a bit deeper.