InvestorQ : Is it a good idea to average positions in the stock market?
Maniish Lofar made post

Is it a good idea to average positions in the stock market?

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Maniish Lofar answered.
3 years ago
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Have you ever wondered as to why traders and investors have this natural urge to average their positions? Averaging means; doubling up your position when the price movement goes against you. Well it is simple! You bought a good stock; as the price goes down, it just gets better. Sound logic, but rarely ever works in the market. Whether you are long or short in the market, averaging your position has normally been a losing proposition. Why does a logical concept like averaging not work in reality? That is because when you buy a stock and it goes down then it means that your decision was wrong in the first place. By averaging or doubling your position you are just being wrong twice over. That is why it is not a great idea. Not that you cannot make money by averaging. There are occasions when you may average and get it right, but then as a trading and investment practice, averaging should be rarely practiced.

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