Average Down

The practice of buying additional shares of a stock as its price declines, reducing the average cost per share of the overall position. Value investors like Warren Buffett average down when they believe in the long-term thesis and see lower prices as a gift. Traders are more cautious -- "averaging down on a loser" can turn a small loss into a catastrophic one if the thesis is wrong, and Paul Tudor Jones famously advises "losers average losers."