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What is Averaging Down?

Basics

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Buying more of a losing position to lower the average entry price. The average price falls, but the total amount at risk grows and the fact that the judgment was wrong remains. The difference from planned scaling in lies in the order of events: if it was decided before entry it is scaling in, and if it was decided after seeing the loss it is averaging down.

Averaging Downthe average falls, butthe loss and the size grow with it

Lessons using this term (with diagrams)

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Averaging Down meaning — Trading glossary | MarketSurfer