Home › Forums › Members Forum › Averging up from entry below the lowest average down level. › Reply To: Averging up from entry below the lowest average down level.
When we average down on a particular Logical Investor stock pick, we are allowing the movement of the market, and our subsequent purchase at the lower price, to reduce the average cost per share of that pick. If you were to buy as the market rises, you negate the effect of averaging down and take on more risk. The overall effect would be to reduce the net gains accrued as the stock price rises above our new lower break even point…Averaging up makes that break even point higher thus reducing our profit when we decide to sell the position….