Bad investors average down, buying more shares of a sinking stock to decrease the average price per share they have paid. This strategy is like throwing good money after bad, and is hardly ever effective. Nevertheless, individual investors seem to continually engage in this practice.
Professionals are much more likely to 'Average Up.' They acquire more shares as the stock price climbs and the momentum of the company rises. They see increasing share prices as a confirmation of their research success, rather than a profit-taking opportunity....Peter Leeds.
WHO IS LISTENING?
Posted by tigertony on :
I will pass, when it goes down a little i sell.When it goes up i will sell and buy back on dips.They almost always retrace most there gains.If you buy when it goes up, you are gonna be in deep Sh#t if it drops after and does'nt run again.Good Luck
Posted by Clyde Crashcup on :
I wouldn't try it with pennies.
Posted by BT on :
WRONG! What goes up must come down. If you continue to average up the and the price falls, you lose more then you originally invested. If you average down, and the price goes up you make back what you initially lost and then some.
You should do more research before posting advice! What books have you read and what expeirence do you have?
People become very weathly averaging down, especially if the stock keeps falling and is no good but you lost 50% of your original investment. Instead of taking that loss, you can average down and get that back and get out of the stock completely.
If you listen to Jim Cramer, he always says to average up.
Posted by BT on :
We can go back and forth with charts. Mine to prove my theory and yours to prove your theory but all in all stocks especially pink sheet stocks carry a risk! Some have more rewards then risk.
By the way, if you follow Jim Kramer, all his stocks go down within months. At least the ones I followed that he mentioned.
To me there is more risk buying a $40 stock then a $1 stock. If you don't understand that, then we're on different levels and you shouldn't be posting in the "micro penny" forum.
Posted by WINNER24 on :
If you read the posting well before blowing off steam you would have realized that it was a direct quote from Peter Leeds the "world aclaimed" guru of penny stocks. I never claimed to be giving an advice i was just as surprised when i read it that was why i posted it .. to see what others think. Your outburst was uncalled for.
quote:Originally posted by 1BigTip: WRONG! What goes up must come down. If you continue to average up the and the price falls, you lose more then you originally invested. If you average down, and the price goes up you make back what you initially lost and then some.
You should do more research before posting advice! What books have you read and what expeirence do you have?
People become very weathly averaging down, especially if the stock keeps falling and is no good but you lost 50% of your original investment. Instead of taking that loss, you can average down and get that back and get out of the stock completely.
Posted by Penny-Trader on :
I'm no expert but averaging up makes no sense to me as you are raising your average price at which you need to sell at to at least get your original investment out.
averaging up puts you in more of a risk to loose money as if you have a sharp dip in price you may not have time to react to get out to save your original investment.
the higher your average price is the less of a profit you are showing when you do sell the stock. kind of seems to be self defeating to me.
I'm in the stocks to make the potentially higher gains. averaging up seems to be limiting your potential.
JMHO feel free to show me how I'm wrong in this idea.
Rod
Posted by SCinFL on :
I think it depends on the mindset of the stock purchaser...whether short term, or long term as is the case for Peter Leeds recommendations.
Posted by SCinFL on :
I agree with you Winner24, there is no reason for people to get nasty about you posting what a professional stock picker thinks.... They should read the posts thoroughly before slamming anyone.
Posted by WINNER24 on :
Thanks a lot Sarah .. lol .. I was beginning to wonder what happened to my right to free speech...
quote:Originally posted by SCinFL: I agree with you Winner24, there is no reason for people to get nasty about you posting what a professional stock picker thinks.... They should read the posts thoroughly before slamming anyone.
Posted by yes on :
I subscribed to Jim Cramer's Action Alerts Plus for a good while. He averages down quite a bit actually. He only does it though when it adds substantial value to his position and when he's pretty sure it'll come back eventually. He's a long term guy, who doesnt worry about short term red ink. He's also pretty brilliant. 2002 wasnt the prettiest year for the stock market -- even Jim's portfolio didnt look so hot. But he still had one of the best performance records, second only to that Vanguard fund. (EDIT: And he would have done better if he didnt have buying/selling restrictions because of his radio show.) In the beginning of 2003 he really cleaned up on the market surge.
Anyway that's just my worthless 2 cents..
[This message has been edited by Phoenixx (edited October 24, 2004).]