Buying more of a stock after its price has fallen
Averaging down means buying more of a holding that has dropped, which lowers your average cost. With a lower average, a small recovery brings you back toward break-even. It also raises the total amount invested in that one name, so a further fall costs more than it would have. A lower average price and a smaller loss are two different things.
Buying 100 shares at $1,000 and 100 more at $800 gives an average cost of $900.
For learning, not investment advice. Decisions are your own.
StockFit · TrueNorthLabs Inc.