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02-07-2011, 06:09 PM
I have been told that averaging down is ALWAYS a bad move. True? Do you agree?
I am guessing this could be a TA-ish principle. If you average down, it means the stock is on the downtrend and you're only buying more into your own loss. Most TA people also subscribe to the mantra "Buy high, sell higher" which is the opposite of averaging down.
Somewhere in me I think the context is important. Using a scenario, if I believe that say SIA is a good share to hold and I missed the good price but the current price of $14.20 is still fair, I can enter. Then when the price goes to say $14, and my assessment of SIA remains, I would likely consider buying more. This is in effect averaging down but is to increase my stake and improve my position on a still good counter.
This is different from averaging down when a counter slide in order to minimise the loss and rise needed to breakeven earlier mistake.
Any views?
I am guessing this could be a TA-ish principle. If you average down, it means the stock is on the downtrend and you're only buying more into your own loss. Most TA people also subscribe to the mantra "Buy high, sell higher" which is the opposite of averaging down.
Somewhere in me I think the context is important. Using a scenario, if I believe that say SIA is a good share to hold and I missed the good price but the current price of $14.20 is still fair, I can enter. Then when the price goes to say $14, and my assessment of SIA remains, I would likely consider buying more. This is in effect averaging down but is to increase my stake and improve my position on a still good counter.
This is different from averaging down when a counter slide in order to minimise the loss and rise needed to breakeven earlier mistake.
Any views?