Averaging Down means buying more quantity of a stock at a price which is lower than what it was initially bought at. Averaging down as a strategy is used for bringing down the average cost of ownership of securities by buying additional quantities at a lower price.
Key features of Averaging Down strategy
Key features of this strategy are:
a) Averaging Down can work if the prices eventually go up, yielding a profit
b) If the prices continue to go down, averaging down might not be a good idea
c) Before averaging down on a particular security, the reasons need to be established.
