Cost averaging

[RMAmmerschuber]

I noticed in your current positions you have several stocks currently down significantly from your aquisition price. In the past I have been in similar positions and am curious to know if you ever dollar cost average down. My usual thought is I try to open long positions in only good stocks but sometimes they go down. Generally when this happens I look to triple my shares once a stock falls to 40% of the initial investment. Most times this helps cut losses and frequently increases profits once my sell price target is reached. Do you subscribe to any similar thinking?

[New-born baby]

Yeah

I noticed in your current positions you have several stocks currently down significantly from your aquisition price. In the past I have been in similar positions and am curious to know if you ever dollar cost average down. My usual thought is I try to open long positions in only good stocks but sometimes they go down. Generally when this happens I look to triple my shares once a stock falls to 40% of the initial investment. Most times this helps cut losses and frequently increases profits once my sell price target is reached. Do you subscribe to any similar thinking?

I have ready that this is a bad strategy, but I have also read that once a stock falls, it is odds on that you can climb out of the hole if you double up, that is, if your initial buy was 100 shares, you now buy 200 shares more.
I have done it on occasion, and would do it again in the proper circumstances.

[mooddude]

This will work in some cases and ruin your capital in the rest of them. I am more inclinded to think that it will ruin your capital or freeze it for quite a while. Depends on the stock. Think about CMN recently. Would you add to your position now?

[lak]

I occasionally cost average........... but at the same time if a stock drops 40%..... like you mentioned in you first post....... cost averaging may just make you put all your capital to work on one stock....... in a sense at least.... and that is a tough hole to crawl out of.
That is a serous downside.

[jiesen]

Well would you look at that! (NUS)

http://finance.yahoo.com/q/bc?s=NUS&t=5d&l=on&z=m&q=l&c=


Looks like NUS is poking its head back up today, and we may even see it in the green this week. Remember when it took that 40% hit a while back, and everyone predicted utter doom and failure for this one? Well, anyone who doubled up at 20 (like me) is pretty happy with that move right about now. Of course this doesn't always work out- take BEL for instance... but there's still time for that one.

I'll point out also that OFG is still on sale at $14.

[lak]

Sometimes it works perfectly when you cost average........

[lak]

Right on topic......... My father is down %34 on Nortel......... he has been holding it hoping for a change of tune......... He just emailed me asking whether or not to buy into the obscene weakness in the stock....... strange timing!

[aggredior]

LAK

Some times it works and some times it dosen't. Cramer loves to average down. He was hyping CHTR in the 5-6 range and averaging down--now the stock is worth a buck and may file bankruptcy. You can say the same about NT, SUNW. LU, and on and on. These are dogs that only bite if you buy them.

You can really get hurt when ave. down fails. You can take a small loss and make it big. Generally, I would not use the method. It is a bad way to try and save a bad investment.

[B.J]

Whenever I DCA, I do it with a plan. If a stock I've been watching makes a big move before I expect it to, then I'll buy a third to a half position expecting it to pull back. If it doesn't pull back (they don't always) then I have a partial position working for me. This strategy worked out for me with ABLE a couple weeks ago.

[aggredior]

BJ,

But, do you cost average when the stock breaks down? LAK's example is that of a stock in decline.

[skiracer]

So much depends on your initial strategy for the position. For long term holders of a position it can work to average down on the price. But for short term swing traders and momo guys your usually past your sell point an exit strategy and making the determination to exit the position is the priority, not adding more of a trade going in the wrong direction.

[New-born baby]

Ofg?

I'll point out also that OFG is still on sale at $14.

Hey, Junkyard Dog!

What's the prognosis for OFG these days? I haven't looked at any FA or TA on it, so I am asking to know, "what would the Junkyard Dog do?" Got a price target for us?

[B.J]

BJ,

But, do you cost average when the stock breaks down? LAK's example is that of a stock in decline.

No way. There's no telling how far a stock will drop if it breaks under support. Part of my DCA plan would be to wait until it gets back to support to buy the other half.

[IIC]

I voted yesterday to "Cut"...Heck, I bot ZIXI last year at 17.05...lesson learned...AGAIN!!!

[aggredior]

I voted yesterday to "Cut"...Heck, I bot ZIXI last year at 17.05...lesson learned...AGAIN!!!

So, you missed by just-a-little-bit. By the way, really like your MrBreakout.com