Averaging down

[wylderhoads]

There was a thread about this but it's gone now I believe or I couldn't find it anyways...

How do you figure this out again?

Let's say I bought 1000 shares @ 1.56

share price is now at .69... If I was to buy 2000 shares at this price what would my average share price be? and what's the formula to calculate that?

Thanks

[wylderhoads]

Or I think I found it... would it be 1000 X 1.56 + 2000 X .69 / 3000 = .81

So my average price would be .81 ruffly. Does that mean if the stock moves to .85 cents I could then sell at a profit??

[wylderhoads]

This doesn't make sense to me LOL... long time ago I bought a stock that tanked. bought 5000 at .375 it's now sitting at 8 cents.

if i'm getting this right, If I was to buy 10,000 shares now at .08 cents

5000 X .375 + 10,000 X .08 divide by 15000 would be average of .063 share price... so I could sell right away at .08 and make profit???

Am I getting that right or am I way out in left field dreaming somewheres LOL

....................No i'm wrong.......... that wouldn't make sense that you would sell for profit.. figures don't add up.... Someone help me understand

[adam c]

the value of ur stock is just that.. the value of ur stock

if u buy 1000 x 1.56 and the stock goes down, then u lose money.. if u buy 2000 x .69 then u gain money on the .69 price u paid, but still lose money on the 1.56 price u paid

if the stock is at .80 then all the stocks u have at at .80 and u have still lost money

1000 x 1.56 = 1560 in value
1000 x 0.69 = 690 in value - loss of 870

2000 x .69 = 1380 in value
2000 x .80 = 1600 in value - gain of 220

3000 x .80 = 2400 in value
original cost of buying 1560 + 1380 = 2940

overall loss of 550

[wylderhoads]

I think I get it. so the example of 1000 @ 1.56 = 1560.... 2000 @ ..69 = 1380... that's would be total of 2940. I would have to sell that stock at .98 cents to break even... .98 x 3000 = 2940

[benyl]

Did you miss high school math?

You buy 1000 shares at $1. You have a book value of $1000.

Stock tanks to $0.50.

You now have a market value of $500, but you book value is still $1000.

Then you buy 3000 shares at $0.50 to average down as you call it.

Now your book value is $2500. That is the initial $1000 you spent at $1 and the $1500 you just spend at $0.50.

Following me so far?

So now you 4000 shares at a price of $0.50, or a market value of $2000.

So you are still down $500, but you have more shares and have invested more money.

Here is the problem. If the price goes down, then you will lose more money than you did by not averaging down because you now own more shares and each share will diminish in value.

The up side is that if the price goes up, it takes less of a difference for you to get even / make profit. In other words, the stock you bought at $1.00 would now only have to go to $0.625 for you to break even with 4000 shares. In order to make a profit, the stock price needs to rise to at least $0.63. Make sense?

Averaging down is not a good idea unless you have strong / inside information that the stock is going to go back up or is very undervalued. That being said, the market is fairly efficient and the price of a stock is based on the collective knowledge of the market. In other words, other people usually know more than you and that is why the price is the price.

Of course, I am not talking about stocks on the Venture exchange when there are news releases. I am talking about the price in between the craziness.

[Mckenzie]

You are on the money.

Adjusted Cost Base of Share= Total Purchase Price + Total Purchase Price/# of shares

Total Purchase Price= # of shares x Price per share + Commission

[RX_EVOLV]

Originally posted by benyl
Did you miss high school math?

Averaging down is not a good idea unless you have strong / inside information that the stock is going to go back up or is very undervalued. That being said, the market is fairly efficient and the price of a stock is based on the collective knowledge of the market. In other words, other people usually know more than you and that is why the price is the price.



:werd: the stock isnt trading at $0.08 for no reason.. you have a better chance making even ( or profit) by investing in another company than to average down with that dog and hope to come out even ( or profit)

[wylderhoads]

Originally posted by RX_EVOLV


:werd: the stock isnt trading at $0.08 for no reason.. you have a better chance making even ( or profit) by investing in another company than to average down with that dog and hope to come out even ( or profit)

believe me I wouldn't invest more into that POS... was just using it as an example... No didn't miss math, just was unsure... I'm sure i'm not the only one who might of had this question.

[wylderhoads]

Gees tuff crowd LOL.... :burnout: