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A strategy used by investors to lower the overall cost of shares by buying as many shares with a given amount of capital in an increasing market. Buying $1000 worth of shares at $30, $35, $40, and $45, for instance, will make the average cost of the sharesx $36.65, lower than the average price of $37.50.
To buy more shares in a publicly-traded company in which one already owns shares after the stock price has gone up. Averaging up increases the average price at which one buys the stock, which, if the price goes back down, will decrease one's profit when one sells the stock. However, averaging up carries the possibility of higher profits with more shares if the stock continues to increase.
To purchase shares of the same security at successively higher prices. When averaging up, the investor accumulates an increasingly larger position in a security while keeping the average cost of the position lower than the security's current market price. Such an investor will earn significant profits only if the stock price continues to rise. The investor will suffer substantial losses if the stock price quickly drops after he or she has established a large position at increasingly higher prices. Compare average down.