How Averaging Down Could Hurt You by John Chapman
Averaging down is something many traders turn to. Why? Because it promises quick relief from painful losses. The temptation can be almost irresistible. Here are some steps you can take to combat it.
Traders face a host of emotional pitfalls, but the biggest is surely the dreaded averaging down (AD). This one has probably wiped out more traders than war, famine, and pestilence combined. Most traders, professionals and amateurs, are aware of its reputation, yet it still gets them. And traders arent its only victims. Everybody is familiar with doubling down or throwing good money after bad ...