Averaging Down

Averaging down is the process of buying more shares at a lower price to try and bring down your average price, hence the name.

Example: You buy shares of Stock X at $20. The stock goes down to $10. In order to try and limit your risk and losses, you buy the same amount of shares of Stock X at $10. Now your shares of Stock X are valued at $15 per share.

Speak Stocks: Averaging Down – Good or Bad?