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Why we do Not Allow Averaging in Stocks?

It is human tendency to consider losses as notional and to keep it in that state; one gets into the habit of averaging to cut down the losses. The below 2 charts will show that how stocks can fall from their highs and a falling stock is like a falling knife which will always hurt you as one never knows what is the exact bottom of the stock. We will let the pictures do the talking part as a chart is better than 1000 words and will show that buying in dips in majority of time do not work and you may get badly struck as falling stock has no limits.

See price of S Kumars Nationwide is touching Rs 3 levels despite seeing a high of 36.75 and stock has fallen in a very short period of time.

law of averaging do not hold in stock market
Now we will see that how a quality stock like Wockhardt Pharma has fallen down from 2120 level in Mar 13 to 800 Levels in Jul 13 & fall is still not stopping and mind it; this is a quality stock. So avoid averaging by all means; however it may look lucrative.
Have a look at adjacent screenshot to know the reasons how US food and drug warning letter for its Maharashtra facility is making the stock go down the drain with each passing day.

Looking for best stock market advice; than remember to check our Hot stock of the day for your intraday tips requirement and for your holding requirement check out our delivery stock tips and each call given in these services are given after having acquired the information which is not known to the market and a number of technical checks are undertaken to rule out any rumour mongering stock.

You can also check out how a client was struck in a dud stock by virtue of averaging here and how by virtue of our advice; he came unscathed.

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