The art of averaging
Average is a term that can sometimes be found in markets; this refers to the average price paid for a particular stock that you bought shares in that particular company.
To calculate the average price paid for a particular share, you add up the total amount you paid for the shares and divide that by the number of shares you bought at that company.
The answer is the average amount you paid per share.
Try this math question:
There are five numbers 10, 20, 30, 40, 50
What is the average number?
Add five numbers: 10 + 20 + 30 + 40 + 50 = 150
Divide the total number of five numbers (150) by 5
150 divided by 5 = 30 (answer)
You can easily do this with a calculator.
Today, there are so many stock trading platforms that investing directly in the stock market has never been easier for ordinary men and women.
So how does the average work?
If you buy stocks at regular intervals, you will pay different prices for each stock as stock prices go up and down. Imagine you bought something at the supermarket at full price last week, and then you bought the same item this week per share. The average price you paid for an item will be somewhere between a higher price and a lower price.
The stock market works that way. By buying a certain share at regular intervals, you will be able to pick up part of the shares in it when the price is lower. This is the advantage of regular savings.
In fact, I think there is a reason to buy more stocks when the price is low. The average price paid per share is determined by budgets as explained earlier.
An averaging strategy can also be used to invest in cryptocurrencies.
Bitcoin is more volatile than the stock market, so a discerning investor who has an eye for cheap can invest when the price falls.
There are so many stock trading platforms available that gaming in the markets is available to everyone. I joined two of them in New Zealand. Most countries have stock trading platforms available. Easy to apply for them; you need some form of identification. Just follow the instructions and everything is ready.
Playing in the market requires a positive mindset and a cool head. If you have them, you can profit from falling markets. Averaging is a method that takes advantage of a falling market.