Don’t Frown, Average Down

A sudden downturn in price after entering a position may discourage many investors. However, it can be beneficial to double down by increasing your position, thereby “averaging down.” An example: a trader buys stock in a company at $100 a share. The share price declines to $80 a share. If the trader is still bullish on the stock, they can double their position while decreasing their average purchase price to $90 a share.