decision time for ADX,VIL,XST holders ..
Investing in Stock
If you are investing in a stock, you look for buy and sell signals based on a number of indicators. Your goal is to make money on the trade and you have no real interest in the underlying company other than how it might be affected by market, news or economic changes.
In most cases, you don’t know enough about the underlying company to determine if a drop in price is temporary or a reflection of a serious problem.
Your best course of action when investing in a stock (as opposed to a company) is to cut your losses at no more than 7%. When the stock drops that much, sell and move on to the next deal.
Investing in a Company
If you are investing in a company (as opposed to a stock), you have done your homework and know what’s going on within the firm and its industry. You should know if a drop in the stock’s price is temporary or sign of trouble.
If you truly believe in the company, averaging down may make sense if you want to increase your holdings in the company. Accumulating more stock at a lower price makes sense if you plan to hold it for a long period.
Conclusion
If you’re playing stocks, averaging down probably doesn’t make any sense. Take a small loss before it becomes a big loss and move on to the next trade.
If you invest in companies, averaging down may make sense if you want to accumulate more shares and are convinced the company is fundamentally sound.
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