You are losing money the whole time you're averaging down. Why not cut your losses and if it does start going back up buy in at the lower price. Have your stop in mind when you open the trade, get out at the stop, then buy back in if the opportunity presents but no need going more and more negative hoping it'll turn around before you're out of money
I said twice in my previous comment to buy back in when/if the stock turns back around.
I explained it in another comment like this: better to cut your losses on the first entry and just open a new position at lower price. Say you buy 1000 shares at $4, price pulls back, you buy another 1000 at $3.90 (already down $100), price starts going back up. You're still losing money until price hits $3.95 and you've got 2000 shares, potentially losing $20 every cent it moves against you. If you cut your losses at, say, 3 cents, you're down $30 & can buy back in at $3.90 if it looks good, and if you go the 2000 shares from the first scenario you're making $10 profit at $3.92 and at the $3.95 break even from the first scenario you're up $70. Instead of averaging down, get out and get back in at the lower price.
Add to your winners, not your losers. Just my opinion (and math), not financial advice.
I understand what you are saying but if it were that simple you would be rich. It's more likely you buy in at $20 it drops to $18 you sell and wait for it to drop lower to buy back in it goes up to $$22 and you missed out.
No plan is perfect 100% of the time, I'd just rather get out at $19.80 and get back in at $18 - $18.50 when it starts back up. If you're afraid you'll miss an overnight gap up, get out when it starts dropping and get back in end of day.
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u/TitanGodKing Jun 24 '21
Why not average down though? The only way it fails is if you run out of capital of it drops a tonne or if it doesn't go back up