There is a good video someone put on HC of Dennis Gartman on averaging down (or "doubling down" ads they call it in the US). I can't find the video online now, but there are articles about the video online. If you can get a look at the video, though, it's a good one.
Sometimes averaging down will work and sometimes it won't- stocks go down and up- it's a bit random. Whilst it is known that bottom-picking is rife with danger, unless a share is going to disappear, then it might just be having a rough trot. It's more of an "egg" issue, I think- that one can put too many eggs in one basket- because averaging down or up just means often doubling one's holding in a specific stock, and that's not a balanced thing to do. Perhaps it means that one is (a) in love with the stock or (b) that one is is disgusted by its performance, but desperate to come back from a losing position with it.
The first time we buy a stock, we are hopeful and optimistic, which seems healthy. If we average down, perhaps our emotion is misplaced, as per above.
I'd be interested in hearing if averaging down has worked for people. It must work for some?
