Ann: Placement, page-150

Here's another tip Disco. There's a difference between accumulating to make a profit and averaging down to try to reduce a loss.

The new sub holders average pre-consolidation was 0.0033. After consolidation he started buying again and drove his holding up to 10.5m shares with an average immediately prior to the placement of 0.042. At that point he was sitting on a 41% paper loss in a company that was running on fumes. By throwing another 100K at them he reduced his average to 0.0345 and his paper loss to 27.5% and the company has another month to pull a rabbit out of the hat. If they don't then he'll have to make another big decision.

Averaging down is a bit like the old "double your bet on black every time red comes up and sooner or later you'll get your money back" trick. You can only win on the first spin, if you don't from then on it's either break even or lose even more.