How the average price is calculated
Your average cost per share is a weighted average: add up what every purchase cost you, then divide by the total number of shares you hold.
Average cost = (Σ price × shares) ÷ (Σ shares)
It is a weighted average, not a simple one. Averaging the two prices only gives the right answer when you bought the same number of shares each time — which is why buying 100 shares at $50 and then 300 at $40 gives an average of $42.50, not $45.
| Buy | Price | Shares | Cost | Running average |
|---|---|---|---|---|
| 1 | $50.00 | 100 | $5,000 | $50.00 |
| 2 | $44.00 | 100 | $4,400 | $47.00 |
| 3 | $38.00 | 200 | $7,600 | $42.50 |
| Total | 400 | $17,000 | $42.50 | |
That $42.50 is your cost basis per share and your break-even price before commissions and taxes: the price at which the whole position is worth exactly what you paid for it. Below it the position is down, above it it is up — regardless of what any individual buy cost.
Averaging down and averaging up
The calculator handles both, because the arithmetic is identical — only the direction changes.
- Averaging down — buying below your current average. Your average cost and break-even price fall, and your total exposure rises.
- Averaging up — buying above your current average, usually to add to a position that is working. Your average cost and break-even price rise, so a smaller pullback is enough to put the whole position back in the red.
Both are the same weighted-average formula. What differs is the situation you are in when you press the button.
What this calculator does not tell you
It gives you an accurate average, break-even and P&L. It cannot tell you whether adding was a good idea — and the two questions are easy to confuse, because a falling average looks like progress.
A lower average isn't a lower riskEvery share you add increases the money at stake. Below the price where you added, a larger position loses proportionally faster. Decide your maximum position and your invalidation level before you average — not while the trade is underwater.
For the full trade-off — the recovery math, how a planned scale-in differs from a reactive add, and a checklist to run before you buy more — read averaging down: when it's a plan and when it's a mistake. Then check the trade still stands up with the risk/reward calculator and risk management 101.
Frequently asked questions
How do you calculate your average share price?
Add up the total cost of every purchase (price × shares for each buy), then divide by the total number of shares. That weighted average is your cost basis per share, and the price at which the position breaks even before costs.
What does averaging down mean?
Averaging down means buying more of a position you already hold at a price below your original entry, which lowers your average cost per share. It improves your break-even, but it also increases your exposure — so it should be a planned decision, not a reaction to a loss.
Is averaging down a good idea?
It depends on whether the add was planned before you opened the position. Averaging down as part of a scale-in strategy with a fixed maximum size is a sizing decision; adding to a losing trade because it fell, with no cap on total risk, is a reaction. The math lowers your average price either way — it also raises your loss if the position keeps falling.
Does this work for options as well as shares?
The weighted-average arithmetic is the same if you enter the premium per contract as the price and the number of contracts as the quantity. Be aware that options carry an expiration date, so a position cannot simply wait for a recovery the way shares can.
What is my break-even price after averaging down?
Your break-even is your average cost per share, shown as the main result above. Commissions, fees and taxes are not included, so your true break-even is slightly higher than the figure the calculator returns.
Is anything I type here sent anywhere?
No. The calculation runs entirely in your browser — nothing you enter is uploaded, stored or shared, and there is no sign-up.
