Adding To Your Position
Adding to your position is a stock market term for increasing the number of shares you own of a particular stock. Investors will often add to their position when the price of a favored stock falls, particularly if the investor feels certain that the price will go up again. Adding to your position when stocks are selling for a lower price is a great way to add to your portfolio at a price you can afford.
When you add to your position, this may change the basis for your stocks. Your basis is the average amount that you paid for a share of stock. Since we often pay a different price for shares of the same stock purchased at different times, our basis can often change each time we buy the stock. For example, if you buy 100 shares of stock at $10 each on your first purchase, then later buy another 100 shares at $15, your basis is $12.50 per share.
You can study the trends of a particular stock in order to predict the best time to add to your position on that stock. Trends may help you to understand periods of time when the stock price typically rises, and times when it’s typically lower. Understanding these stock trends can help you to know when the time is right to add to your position and when it’s time to sell.
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