The price differential is so small, I wouldn't call that "averaging down", though it technically is... more like "accumulating [at a perceived] value price". Last night there was a pop in First Solar (FSLR). If you look back at the history, FSLR was trading @ $180... later @ <$12.... today, ~$60. That's a stock where "averaging down" might have gotten a trader into BIG trouble. But if he "stopped out" and "rebought at a lower price"... better.
Averaging down is for those without a sense of practical price action. When hope takes over ability to read the market.
Assuming no averaging down until forever, which obviously leads to ruin. There is a tremendous fundamental flaw of averaging down that you must realize. Your worst losers are on full size, many winners on minimal size, that goes beyond the principles of good smart trading.
Come on you guys... I deserve some "LOLs" for this. Or maybe even some "LMAOs", if you were blessed with a good sense of humor.
How do you feel about averaging into a winning trade? I think history proves that if theoretically you were able to average down forever into a basket of stocks, you would win eventually due to the upward drift. Other markets, I am not so sure---
If new signal with its own individual stop while previous signal is well in the money even if you get stopped on the add, absolutely add to the winning trade. As far as your second comment, what if I create a basket of stocks that went bankrupt?
Average down works only few times, you have a great chance of emotion getting in then forgetting to control loss will eventually end up blowing your account. Self experienced!