Averaging Down Strategy
"Averaging down" is an investing strategy where a stock owner purchases additional shares of a previously initiated investment after the price has dropped. The result of this second purchase is a decrease in the average price at which the investor purchased the stock.
Trading Warning: Averaging down is highly effective for fundamentally strong, blue-chip companies during broader market corrections. However, averaging down on a fundamentally broken stock ("catching a falling knife") is the fastest way to wipe out a portfolio.