In investment strategy, When the share price falls, additional buying is the same as the taboo. Many investors are trying to lower their losses through additional buying when stock prices fall. But in the end, the loss only gets bigger.
The reason most investors make additional purchases is to reduce losses when losses occur. if stock prices continue to fall, we continue to make additional purchases to reduce losses. However, the loss grows exponentially.
Another reason why additional purchases are risky is that if the decline of stock prices is prolonged, the amount invested must be kept in a loss state for several years. The situation is the same as if you are psychologically burdened and you see real loss in terms of opportunity cost.
The strategy of buying additional stocks should be a kind of concept of diversified investment. In other words, if you have the right strategy and countermeasures, it can be a valid strategy.
If you want to take advantage of additional stock buying strategies, you must approach it strategically. If you can take advantage of additional buying techniques with a good strategy, you can benefit from lowering the price you buy. If the stock price rises afterwards, you can get a fairly large return on investment even if you only reach the initial buy-in.
Even if you are not able to determine the initial buying price range of stocks, additional buying strategies can be effective. In this case, we will use a strategy of slightly lowering the price range while taking a small number of purchases at a reasonable price. This strategy is to set the stock purchase price as low as possible.
Strategies to make better use of additional buying
The most important thing is not to buy down stocks. If the stock price of my stocks is declining, I must first check whether the stocks are worth buying.
If, after careful review, you are buying additional shares but the stock price continues to fall, you should set a target for how much loss you want to sell.
Predicting stock price declines is as difficult as forecasting share price rises. In the case of continuously falling stocks, a loss rate of -50% or more may be taken into consideration.
In the end, it is important to set the maximum loss you can afford yourself. After setting the maximum loss, you need to set the price range you want to buy and create a thorough rebound scenario. That is to say, at some point, in some situations, to anticipate how much rebound will occur, and to set up strategies such as selling some stocks.
You should not invest a lot of money from the beginning. At first, you need to test your own scenarios by buying small amounts of stock in small amounts.
However, no matter how thoroughly the scenario is, buying additional is a very dangerous strategy. Additional buying strategies must be based on sophisticated strategies and forecasting scenarios.