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Graham_1954

1,192 Posts.

05/01/16

17:58

Post #: 16733523
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All sounds philosophically wonderful however I fail to see the difference between buying dips and averaging down, One has no idea where the downtrend will end.
I remember in here when we were in the 5's many were saying charts show support at 4.8, then 4.3 then 3.8 etc. Then most chartists went deadly quiet. We have now tested 2.7, 3 times.
I hope the downtrend is over but one hour of trading does not a trend make.
I bought and sold 25% of my stake a few times on the way down and averaged down my buy price.
I have been in RYG 6 years and now only a couple of tics below my buy price.
I don't think that makes me a loser.

Originally posted by wombat53 ↑

dazza - you held some very good stocks. A couple of points:
1) "Since then it went down and I have been topping up all the way down"  -  you "averaged down", is the term, buying more of a falling stock.
2) Unfortunately this is about the worst thing to do (altho' it's always very tempting)...to buy  what seems like a bargain", but buying a falling stock (when already underwater) is the road to ruin. It falls further, you lose more, and then you buy more, getting lower avg entry prices and it falls further.  Each successive lot (parcel) incurs its own loss which just snowballs. You get the point. We've all done it. I averaged up, and then  - out of desperation during the collapse - bought another parcel at 3.1 late December. Maybe I was lucky, but it was a Violation. That I was right (I trust, based on today's action), doesn't mean it was the right thing to do. It wasn't.
One has to have a discipline, and I let mine lapse. And indeed it fell further to 2.7. It could easily have fell further. Most expected that. I did. Human nature into play. And there is room for human nature in markets....none. Hence the computers, algorithms, bots....the system is automated, no emotion.
Best is to average up - if not underwater....buy more of the (rising) stock when it retraces ("buying the dips"), even if you pay more than you bought it (and you will pay more since you are not underwater: U R averaging UP, not DOWN). But at least you're on the right side of the trend. We want to buy stocks that are rising , not falling. Imaging if you'd averaged up on A2M?
Wouldn't that have been a good outcome?
I know this is easy to say.....but the other way leads to ruin. Once in a blue moon, you'll be lucky, and it'll  rebound and the bargain really was one, but that is the exception case.
Hope this helps.

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RYG Price at posting: 3.5¢ Sentiment: Hold Disclosure: Held
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