Most of the times, a position taken by you ( either shorting a index /equity features -ve or longing of the same+ ve ) may not SWING as THOUGHT / PERCEPTED by you , within a day; In that case it is moving as opp.in direction of your position.,
In that case( provided one has enough margin both /regular-&- M2M) , Is it advisable to have a Strategy of averaging .,
For Ex Today BAJAJ FINANCE reached 7710 ;
its may features ( BF may 2016)was trading at 7708-7713, so hoping that , it may reach 7750 , one has longed +7712, but eventually reached 7635, so instead of SQUARING the position , one may Go long + BF may 2016 at 7640.,
Thus his position is 2 +BF may at 7685 (7750/2+7640/2),
, so eventually if in next week , it crosses 7700 he has made profit,
at the same time , it goes 7600 , his losses will be trimmed LESS
There is a saying on the streets that “Never average your losing positions.” If you have extra margin then it is advisable that you trade some other stock which is in a strong uptrend. Don’t try to cover your losses with the same stock by averaging. It may work for a few times but in the long run this strategy will be negative for your capital.
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