Averaging Up Question

safvan

Established member

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• Jul 11, 2011

• #1

Hi

Okay it is quite a basic question but I would appreciate the answer from someone who has averaged up in their stock trading.

I am going to try averaging up strategy. Its something custom but I had one very basic question in mind.

I am correct to assume that the averaging up is PRICE based and not based on number of shares???

For example

First set of shares bought 100 shares at $1 with total cost = $100

Second set of shares bought 1,000,000 shares at $5 with total cost = $5,000,000

So is my assumption correct that I would have a total of 1,000,100 shares at the price of $3? that $1 + $5 / 2 = $3???

With that assumption in mind I already have $2 Million dollars in profit.

Thank you.

 

barjon

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• Jul 11, 2011

• #2

er, no you have 1,000,100 shares at an average price of $4.996

 

DashRiprock

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• Jul 11, 2011

• #3

OMFG

rite

wat u do is u add up all the shares u have

so, like, say I buy 5 @ 12 and another 3 @ 16, I have 8 in total eh?

then my VOLUME WEIGHTED AVERAGE PRICE is

(12 * 5/8) + (16 * 3/8) == 13.5

k?

really this is quite easy stuff. If not intuitive then take a breather imo.

 

safvan

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• Jul 11, 2011

• #4

okay thank you.

 

Hotch

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• Jul 11, 2011

• #5

safvan said:

For example

First set of shares bought 100 shares at $1 with total cost = $100

Second set of shares bought 1,000,000 shares at $5 with total cost = $5,000,000

So is my assumption correct that I would have a total of 1,000,100 shares at the price of $3?

Click to expand...

Were it so easy.

 

safvan

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• Jul 12, 2011

• #6

nevermind wasnt thinking right..removed post..drank too much!

 

Last edited: Jul 12, 2011

YouAreNotFree

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• Jul 12, 2011

• #7

How can the average cost per share be below the original price paid if the price has since risen?

The average cost would be a fraction over $1.

 

DashRiprock

Experienced member

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• Jul 12, 2011

• #8

dude its all sums.

just write down how much you bot/sold at wat price and if it aint crystal just stop.

 

BeginnerJoe

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• Jul 12, 2011

• #9

If it's a hassle then just average down like I do. No thinking necessary.

 

DashRiprock

Experienced member

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• Jul 12, 2011

• #10

yeah wat he sed

 

safvan

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• Jul 12, 2011

• #11

BeginnerJoe said:

If it's a hassle then just average down like I do. No thinking necessary.

Click to expand...

:clap: Sorry im not that rich yet to waste money but good luck to you!

 

C

Chartsy

Experienced member

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• Jul 17, 2011

• #12

total value of shares/number of shares=average price.

 

M

market_bull

Active member

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• Jul 17, 2011

• #13

Chartsy said:

total value of shares/number of shares=average price.

Click to expand...

1) Calculate average price.
2) ???
3) Profit!

:innocent: