The 66-year-old, who was appointed Baggies boss following the sacking of Slaven Bilic, said at his unveiling last week that he would assess his squad to see if he needed additions next month.
A survival expert, Allardyce thought it was likely he would want to make additions when the window opened.
But after assessing his players both in training and in the derby defeat to Villa, he does now feel recruitment will be key to their hopes of staying in the Premier League.
“By the end of this month, the window will be open and we will have to look at what is available to strengthen the side,” Allardyce said.
“We’re also going to have to look if we can move a few on. I think trading in January might be a crucial part of whether we stay in the league or not.
“We need to start looking at the players who may be available and who would want to come to West Brom.
“It’s not just me, it’s me and the staff – and all together we will try and find the best player to bring in to West Brom during this period.
“Maybe it will be more than one. Maybe it will be more than two, we’ll have to wait and see.
“Finances will be tight, I understand that, that was explained to me before I arrived.
“But we might be able to do some trading. That is one of the biggest parts of the job at any club – your trading, your ins and outs.
“If one player goes out you have to bring in a player that is so much better.
“If you get that right, you start building a stable, strong, squad that can survive in the Premier League and develop into one that will challenge in the top half rather than battling relegation.”
While finances remain tight at The Hawthorns, Allardyce believes the coronavirus pandemic means there may be clubs who are desperate to offload players.
“I’ve found the hardest window to deal in is January,” he continued. “But I’m not so sure about the level of the transfer market because we haven’t experienced anything like this before. We have got to try and be clever in the window – there might be things to our advantage.
“We might find that players are available because of what has happened with the pandemic.
“Clubs might need to cut their playing squads, they might need to save money, they might need to move some players out.
“If that is the case we have got to be right on the button and be ready to move for that player.
“I believe players could be cheaper than they have ever been because of this pandemic.
“If that’s the case we have to try and be the masters at taking advantage of that.”
Meanwhile, Allardyce now looks at Arsenal as one of Albion’s relegation rivals.
Mikel Arteta’s side haven’t won any of their last seven Premier League games and currently sit four points above the drop zone.
“If they are in the bottom eight at the moment, then yes absolutely,” Allardyce said when asked if Arsenal are relegation rivals.
“I believe they haven’t won a Premier League game in nearly double figures.
“They will be wondering what’s hit them, they will be wondering why they’re down there and they will be wondering what it’s going to take to get out of that position.”