It's a heuristic (a human behaviour/mental shortcut).People...

It's a heuristic (a human behaviour/mental shortcut).

People assume that the market 'knows' their buy-in price and that the market will change behaviour in some manner once that 'average cost price' is reached. Then your fight or flight reflex takes over with the notion that you need to make a decision quickly. And that decision is driven by your most recent experience with that stock (in this example, negative).

The reality as mentioned is that the market usually does not care exactly what your average price is. If it's been going up on fundamentals or hype or whatever reason, it's likely to keep doing it until the demand and supply for the herd readjusts.

Hope that makes sense!

Human behaviour is a wonderful thing to observe and stock markets and stock forums are a great place to do it .