What price to buy, how many shares to buy?
You must get your position sizing strategy correct, otherwise inspite of average your buy price of stock several times, if you do not know how much quantity to buy at what price.
Example:
The example presents the case of 4 traders who have the same capital size of Rs 5,00,000/-, buy the same stocks, enter at same prices and exit at same prices, yet each has a different outcome.
See, how their outcomes are diametrically opposite despite same capital, same stocks and same entry/exit levels. Only quantity is different and that is what mattered in the end. Yes, in trading, size matters. That is the power of position sizing.
– Position Sizing concept courtesy Techno-Funda Society.
What is stock averaging, how helpful is it?