scale-down buying investment & finance definition

Scale-down buying tends to match up with scale-up selling, which is buying low and trying to pick a bottom but diversifying the position in time. The lower the price goes, the more you want to buy. For instance, if a trader bought all the way down to $12 for a barrel of oil in 1998 and then sold as the market rallied and kept on selling to $39, one would believe he or she would be rich. However, all of the margin calls to deposit more money into his or her brokerage account would put a different spin on the profit picture. Producers of oil-related products such as gasoline or airlines tend to be scale-down buyers of jet fuel in order to lower their average cost of fuel. With their large credit line they can cope with the margin calls. This term is typically used in the futures market.