Averaging down
Buying more of a fallen holding to bring the average price of the position down: the break-even point moves, and the size of the bet on the original idea grows with it.
How to read the number
It makes sense when the reason for the fall is known and does not invalidate the reasoning, and when room to increase the weight was allowed for in the plan beforehand.
When the metric lies
An average price is a property of your purchase history, not of the security: the market does not know it and it does not affect future returns. The technique adds weight to the worst position precisely when the arguments for it have thinned.
Also known as: adding to a losing position