馃攳
Trading Tips: How and When To Average Down - YouTube
Channel: StocksToTrade
[0]
- So in the traditional stock
market in trading parlance,
[4]
you might hear about averaging down,
[6]
and that being a viable
strategy over time.
[10]
I'm actually very skeptical about
[13]
ever averaging down in a stock.
[14]
And today, I'm gonna tell you why.
[16]
(upbeat music)
[23]
Hey everyone, lead trainer
with StocksToTrade,
[25]
Tim Bohen here.
[26]
Be sure to subscribe and ring that bell
[28]
to be notified as soon
as a new video hits.
[31]
We do a lot with these videos.
[33]
Really proud of what we do
on this YouTube channel,
[35]
whether it be tips and tricks, like today,
[38]
whether it be long-term webinars,
[40]
like we do every Monday
night on YouTube Live,
[43]
or if it's breaking down fundamentals,
[45]
or breaking down technicals,
[47]
offer a lot of great information here,
[49]
and I would love for you
to be notified immediately,
[52]
so be sure to ring that bell.
[54]
So today, we're gonna
talk about averaging down.
[57]
And if you took a high school class
[60]
or possibly a college class
[62]
or maybe you've read some of what I call
[64]
the old school methodology,
[67]
they may talk about averaging down.
[69]
You know, the idea is
you're buying at a discount,
[72]
you're lowering your cost basis.
[74]
So, let me start out by
explaining what averaging down is.
[78]
Then I'll explain why I
don't think you should do it.
[80]
And then, why I don't think
it's ever a viable strategy.
[83]
So, when you're averaging down,
[85]
the idea is you bought a stock at say $10,
[89]
and the stock has now dropped to $8, okay?
[94]
If you buy a hundred shares at 10,
[96]
and you buy a hundred at eight,
[99]
your average cost basis is now $9.
[102]
So, you've lowered your cost basis,
[105]
which that way the idea
is, you bought at 10
[108]
because you believed in the stock,
[109]
you bought more at eight,
[111]
you brought your cost basis down,
[113]
so that if and when the stock trends back,
[115]
you're in the green, you know,
[117]
in this scenario, you're now green
[119]
when the stock hits 9.01, okay?
[122]
Whereas, in the past, if
you hadn't averaged down,
[125]
the stock would have had to
get back to $10 or 10.01,
[129]
for you to be "in the green."
[131]
Sounds great,
[134]
and in my opinion,
[136]
it only sounds great.
[137]
I don't think it plays out over time
[139]
because, especially in
these lower-priced stocks,
[143]
these volatile stocks
that we love to trade,
[145]
so many of them just
never come back, okay?
[148]
We're talking about momentum stocks.
[150]
We're talking about $1
stocks, $2, $10 stocks.
[153]
We're not talking about Apple.
[155]
We're not talking about Amazon.
[157]
I'm guessing you're on this channel,
[159]
you want to learn how to trade.
[160]
You've probably got a small account.
[162]
You can't trade a $1900 stock like Amazon.
[166]
You can't buy one share, much less 10
[168]
or 100 or 1000 shares of
Amazon to make real money.
[173]
So, averaging down in Amazon
[175]
or Apple or Microsoft is one thing.
[177]
If you're averaging down
in a momentum stock,
[180]
a big runner, you're just setting
[182]
yourself up for disaster, really.
[184]
Because so many of these stocks spike,
[186]
fail, and never come back.
[189]
So, that's why I think it's just
[190]
something to never, ever try to do.
[193]
And most of what happens to traders is
[197]
you know, they refuse
to admit they're wrong.
[200]
They can't accept the loss.
[201]
They become a bag holder.
[203]
There's nothing worse
than being a bag holder.
[205]
What you're doing there, is you've decided
[208]
I'm not gonna take this loss,
[210]
I can't be okay with being wrong,
[212]
I'm gonna add lower and
I'm gonna hope and pray
[215]
that this stock spikes back someday.
[218]
That is loser mentality.
[220]
That is why 90% of day traders fail.
[223]
You wanna have a winner mentality.
[225]
You wanna be adding to winners.
[227]
Not adding to losers, okay?
[229]
It's counterintuitive, I get it.
[231]
But if you're in a big running stock
[233]
with news and a hot sector,
and it's gone from one to two,
[236]
you bought at two, now
it's at three, add higher.
[240]
Yes, you're raising your cost basis,
[243]
but you're adding to a winner.
[245]
That's what successful
traders do over time.
[247]
Adding to a loser in low-price stocks
[250]
is never viable over time.
[253]
You might get lucky here and there.
[255]
You'll add, add, add, add, add,
[257]
and then the company gets bought out,
[259]
and you think it's gonna work again.
[260]
You got lucky once.
[262]
That's not how you become
consistently profitable.
[264]
That's not how you succeed over time.
[267]
So, in summary, let me know below.
[269]
Have you added to a loser,
and have you made it work?
[273]
Because I'd be curious
to see the comments.
[276]
But you know, if you want,
post under an anonymous account
[279]
because I would like to know,
[281]
if you've ever add, add, added to a loser
[284]
and made it work.
[286]
I'm guessing a significant majority
[288]
of the comments are gonna say no.
[291]
In summary, have that winner mindset,
[294]
not the loser mindset.
[295]
Add to winners, never losers.
[297]
Cut those losers, let your winners run.
[300]
That's how you become
consistently profitable over time.
[303]
Thanks for watching our video.
[304]
Be sure to comment below with
any trading-related questions.
[308]
We love answering your questions.
[310]
Also, like and share with your friends
[312]
and be sure to subscribe to be notified
[314]
as soon as our next video hits.
[316]
And if you're looking to
expand your trading knowledge,
[319]
don't forget to check out
all of our other videos.
[321]
And be sure to click the trial below.
[325]
Check out Stocks Trade.
[326]
I think it is one of the best,
[328]
most rapidly advancing
softwares out there.
[331]
Be sure to check out our trial.
[333]
(upbeat music)
Most Recent Videos:
You can go back to the homepage right here: Homepage