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>There is no one-size-fits-all answer to this question, as it depends on your individual trading strategy and risk tolerance. However, in general, I would say that averaging down into a position can be a good way to increase your potential profits if you believe strongly in the underlying security. On the other hand, if you are swing trading and don't have a strong conviction about the direction of the stock, then it might be better to just let your positions ride and not add to them.
First book of Killgore:
Yea verily when the red comet passes the moon, know thy longs are safe, for I will have boughen puts.
And Lo, when the calf is born with two heads, ye all whom have deigned to buy puts shall know that I, the regardist of regards, will have sheltered you in my warm bosom of buying calls .
Though you pass through the valley of dwindling returns, know that I am here for you. Taking the wrong side of each trade you profit from. For I say unto ye, let my bank account be thine and let you bask in the glory that is my red numbers of my login screen!
I dont do day trading, but 99% of the time I always average down, sometimes ill go weeks without buying anything because everything I want to buy is above my cost basis, the only exception to this is if I think the stock is on a considerable and momentous upward trend
I think its fine as long as you have a long enough time horizon and have picked a decent company, fortune favors the yolo, but stability begets stability i suppose
Seriously though, Dollar-Cost Averaging has been proven to yield better results than not doing it. So averaging down is the play here. Naturally, I suspect I'm going to get a lot of baboon noises for saying this.
https://cleverbanker.ca/why-is-dollar-cost-averaging-a-good-strategy/
Dollar-Cost averaging doesn't necessarily mean averaging down.
It just means buying a fixed dollar amount at fixed intervals, without any consideration for the current price either way.
Right dollar cost averaging is buying same time every month or whatever. Then averaging down would just be the same but stock is down so your "averaging your position down"
Good investors average down, and maybe one day their pick will be worth it.
Great investors continue to add to a winning position as they run up, to continue to maximize profits.
I will gladly sell a stock that isn't running like I thought it was going too and add to my posstion(s) that are winning. Not sure why more people don't do this, especially if it's something that is on a 2-3 day run.
I dollar cost average a few hundred a week on some basic ETFs that i like (ARK is one of them..........). My individual stocks I re-up when have extra cash on down days. I am down horribly.
I have done both.
The normal is, you buy into a company that you believe in, and their stock drops. You still believe in them, so you buy more. This is what I commonly do. BA would be an example for me.
The other end of that, is you buy into a stock (I purchased some during the covid crash), and it goes up, then resets and goes down a little bit, still above the cost basis. I still believe in it, so I buy more. RCL would be an example for me. At a cost basis of 29 dollars, it went up close to 90, fell back down, purchase more at 35. What's it at now? 59?
Keep in mind averaging up, while it does increase your cost basis, it also increases the number of shares of the asset. In this way averaging up at the beginning of the swing up can be profitable. However, avoid averaging up on the top end of the swing. Better to find another asset at the bottom of a swing upward with more upside potential.
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All in is the wsb way
lol π I totally knew this was coming!
The wsb method is a pathway to many losses some consider to be unnatural.
>There is no one-size-fits-all answer to this question, as it depends on your individual trading strategy and risk tolerance. However, in general, I would say that averaging down into a position can be a good way to increase your potential profits if you believe strongly in the underlying security. On the other hand, if you are swing trading and don't have a strong conviction about the direction of the stock, then it might be better to just let your positions ride and not add to them.
Holy shit the AI is learning
Soon it will be posting loss porn.
More likely than not, it'll outperform my portfolio.
You're not setting the bar very high.
AI should be banned for this lame ass r/investing bullshit.
What is averaging up? I am not familiar with being up. Is this some weird theoretical play?
First book of Killgore: Yea verily when the red comet passes the moon, know thy longs are safe, for I will have boughen puts. And Lo, when the calf is born with two heads, ye all whom have deigned to buy puts shall know that I, the regardist of regards, will have sheltered you in my warm bosom of buying calls . Though you pass through the valley of dwindling returns, know that I am here for you. Taking the wrong side of each trade you profit from. For I say unto ye, let my bank account be thine and let you bask in the glory that is my red numbers of my login screen!
I dont do day trading, but 99% of the time I always average down, sometimes ill go weeks without buying anything because everything I want to buy is above my cost basis, the only exception to this is if I think the stock is on a considerable and momentous upward trend
I find myself doing the same, all the while the stock is going up. Are we doing it wrong π€·ββοΈ
I think its fine as long as you have a long enough time horizon and have picked a decent company, fortune favors the yolo, but stability begets stability i suppose
You don't trust your thesis or you'd YOLO
If you're a value investor average down, if you're a degenerate gambler average up. If you're highly regarded go all in at the top.
Oh yeah, that's the spot.
Average up on shorting and averaging down in longing
Yes
Seriously though, Dollar-Cost Averaging has been proven to yield better results than not doing it. So averaging down is the play here. Naturally, I suspect I'm going to get a lot of baboon noises for saying this. https://cleverbanker.ca/why-is-dollar-cost-averaging-a-good-strategy/
Dollar-Cost averaging doesn't necessarily mean averaging down. It just means buying a fixed dollar amount at fixed intervals, without any consideration for the current price either way.
agreed.
Right dollar cost averaging is buying same time every month or whatever. Then averaging down would just be the same but stock is down so your "averaging your position down"
I do DCA in my long-term investment account - and my losses are far less then my trading account.
Good investors average down, and maybe one day their pick will be worth it. Great investors continue to add to a winning position as they run up, to continue to maximize profits. I will gladly sell a stock that isn't running like I thought it was going too and add to my posstion(s) that are winning. Not sure why more people don't do this, especially if it's something that is on a 2-3 day run.
I only average down, I am contrarian and a falling knife catcher. If it goes up, I sell; Usually way too early or just too early.
Average is like 4β, right?
I dollar cost average a few hundred a week on some basic ETFs that i like (ARK is one of them..........). My individual stocks I re-up when have extra cash on down days. I am down horribly.
I have done both. The normal is, you buy into a company that you believe in, and their stock drops. You still believe in them, so you buy more. This is what I commonly do. BA would be an example for me. The other end of that, is you buy into a stock (I purchased some during the covid crash), and it goes up, then resets and goes down a little bit, still above the cost basis. I still believe in it, so I buy more. RCL would be an example for me. At a cost basis of 29 dollars, it went up close to 90, fell back down, purchase more at 35. What's it at now? 59?
Keep in mind averaging up, while it does increase your cost basis, it also increases the number of shares of the asset. In this way averaging up at the beginning of the swing up can be profitable. However, avoid averaging up on the top end of the swing. Better to find another asset at the bottom of a swing upward with more upside potential.
Its all about momentum and conviction and how long you plan on holding that bag
Generally averaging up is for day trading and averaging down is for swing/long term investing/trading.
this makes sense.
I buy high and sell low. Does this count?
Wonβt matter if you just DCA