A volatile market is an unstable market that goes up and down unpredictably. Buyers and sellers are aggressively active in such situations. A highly volatile market is very risky. Therefore, most of the traders and investors anxiously make wrong decisions and lose their capital.
As a smart investor, it is important that you monitor the market time and invest accordingly. To make our readers a smart investor and maintain their profitability, I am going to share a strategy to generate favorable profits in a volatile market.
What is averaging?
Averaging is a management tool for investors and traders to overcome market volatility. It is a strategy used to maintain profitability that can be effective or devastating. The averaging strategy can be used in two ways: averaging up and averaging down.
Averaging up is done when stocks are moving in an uptrend. By averaging up, we continue to invest in small units consistently as the stock rises. This strategy is somewhat similar to the momentum strategy. Averaging is a technical strategy and should therefore be used with focus.
Averaging down is investing in stocks systematically when stocks are trending down. This strategy is best used on fundamentally strong companies to avoid huge losses. Investors or traders who use the falling average believe in buying stocks at a lower price and selling them at a higher price.
Strategies only work on growth stocks. As an investor, you must first identify growth stocks with good fundamentals to generate profits. Averaging is an effective strategy to overcome market volatility. I hope you find this article informative.
KEEP LEARNING & KEEP INVESTING.
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