Adding to a Loser

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Adding to a Loser

Buying more shares in a publicly-traded company in which one already owns shares after the stock price has gone down, or short selling more shares after the price has gone up. Adding to a loser lowers (or raises, for a short sale) the average price at which one buys the stock, which, if the price goes back up (or down), will increase one's capital gains when one closes the position on the stock. However, adding to a loser carries the risk that the stock will continue to decline. As a result, some analysts recommend never adding to a loser. See also: Average Down, Average Up.