averaging down your stock trades: a good idea? or just crazy? / losing money in stock market trading, averaging down stocks, averaging down forex, average down, average down stocks, cost basis, cost basis reduction, cost basis explained, cost basis definition, cost basis stocks, losing money in stocks, losing money in the stock market, losing money in stock market, losing money trading, losers average losers welcome to looking at the markets with david moadel there's an old debate about averaging down should you do it should you not do it well let's examine that right now
cost of one share of apple, first of all what is averaging down to average down means to put more money into a trade when the trade goes against you like when you buy a stock and it
goes down you could respond by buying more shares of that stock averaging down has the advantage of reducing your cost basis meaning that you would be reducing the average price that you paid for the stock for example let's say you bought apple stock and hundred thirty dollars per share because you thought it was a bargain at that price but then apple
stock goes down to 120 dollars per share you could average down by buying more shares of apple stock because if it was a bargain at 130 dollars then it's even more of a bargain the ads hundred twenty dollars so that's the argument for averaging down so here's the argument against it opponents of this averaging down
strategy might say that it's a mistake because you're throwing good money at a bad trade they may say that you're fighting the trend which is not a good idea sometimes you might hear the derogatory saying losers average losers and i'm not saying that but i've heard people say that before the idea behind this
derogatory saying is that you should admit your mistakes and cut your losing trades short not add to them so here's my opinion and i'm not gonna tell you what to do or what not to do this is just what i do for myself only i only average down if and end it has to meet all three of these requirements i only average down if you have a medium or
long-term timeframe for the trade meaning you're prepared to give the trade plenty of time for the stock to come back up for example if i'm trading stocks or options and i'm willing to give the trade months or even years possibly ok then i might consider averaging down and you can afford to lose more money if
the stock just keeps going down further and further which is always a possibility in any any stock really so you did you know i ask myself can i can afford to throw more money into this trade and lose that money possibly and also only if the stock represents a really great company with a track record of recovering from pullbacks so if if
it's not a stock that has been around for a long time and has lots of capital lots of resources great leadership and a really great track record or history of being able to recover from drawdowns or pullbacks then i would not throw more money into the trade otherwise if it does not meet all of these requirements i do not average down
and sometimes even if it meets all of these requirements i won't average down ok so it has to at least meet all of these requirements and sometimes more sometimes i you know all these things are not even good enough for me to put more money into a trade if i have any doubts in my head if it just doesn't feel right then i won't put i
will not put more money into a trade alright so you know maybe this will inspire you to have some really strict requirements yourself before you start throwing more money into a losing trade many times in my opinion is just not worth it it's better you know i'm better off a lot of the time just admitting that i
made a mistake and just you know exiting the trade because there will always be other opportunities alright so if this is helpful to you then please give this video a thumbs up on youtube and leave comments and also please subscribe to my youtube channel so you can receive the latest updates on my financial educational videos also you
can contact me at any time if you have questions comments or you'd like to get some help putting together a trading or investing plan because you really need to have one you can email me at anytime my email address is david modell act gmail.com thank you so much for watching and listening and i'll talk to you again
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