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Halls of Shrewd'm / US Policy
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Author: Bankman007 ⎊  😊 😞
Number: of 48427 
Subject: When to Average Down
Date: 12/07/2023 7:42 AM
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As someone who's had spotty performance averaging down I thought this was worth sharing.

https://microcapclub.com/when-should-you-average-d...

Averaging down can be a wonderful thing. In fact, variable pricing is the best thing about the public markets. Short-term stock prices are yanked like a dog on a leash by the madness of the crowd.

Investor sentiment is a pendulum that swings back and forth between extreme optimism and extreme pessimism and never sits still. It's on the extremes where the astute investor waits patiently buying or selling.

Even Berkshire Hathaway, one of the largest, most durable businesses in the world trades in a 30-50% trading range every year. Every. Year.

Coincidentally this is also why many successful short-term traders focus on trading the same 2-3 stocks every year. There is enough volatility in a couple things to make a living. These successful traders find the pulse of a company's stock. They know when the heartbeat becomes irregular.

Microcap stocks are inherently more volatile which means you will have even more chances to average down.
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