"On the other hand, I can't actually understand the point of averaging up. Regards...Tim."
2 scenarios.
1. Buy $10000 of shares at $4.00 = 2,500 shares Buy $10000 of shares at $2.50 = 4,000 shares Buy $10000 of shares at $1.00 = 10,000 shares Buy $10000 of shares at 0.50 = 20,000 shares
Shares at time of last purchase = 36,500 @ 50c = $18250 for an outlay of $40,000
2. Buy $10,000 of shares at 0.50 = 20,000 shares Buy $10,000 of shares at $1.00 = 10,000 shares Buy $10,000 of shares at $2.50 = 4,000 shares Buy $10,000 of shares at $4.00 = 2,500 shares
Shares at time of last purchase = 36,500 @ $4.00 = $146,000
Scenario 1 presents more risk exposure over scenario 2 and buying the shares on the up means you have greater exposure to more profit.
If they both move at the same rate, (eg 12 months), scenario 2 you have maximised your time for profit whereas scenario 1 you have lost time and money.
Cheers
SLR Price at posting:
76.5¢ Sentiment: None Disclosure: Not Held