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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » AVERAGING PRICE

AVERAGING PRICE

Go down  Message [Page 1 of 1]

1AVERAGING PRICE Empty AVERAGING PRICE Fri Sep 16, 2011 11:31 am

punter

punter
Stock Trader
Hi Good Morning Experts !!!

I just want to know how do avg the price,

once its going high eg: bought 1000@ 4.03 current price 6.5

once its going down eg: bought 1000@ 4.03 current price 3.2

AND ONCE IT'S GOING FURTHER HIGH IS IT WORTH TO BUY COZ OF AVG PRICE ???

2AVERAGING PRICE Empty Re: AVERAGING PRICE Fri Sep 16, 2011 11:46 am

charith82


Manager - Equity Analytics
Manager - Equity Analytics
Once its going high averaging the price is not the correct concept. Average price concepts comes after you buying a stock if it going down dramatically.

eg if you bought 1000 X@10 your cost is nearly rs.10 per unit. (without taxes)
after it goes down to rs. 7 if u able to buy another 1000 X@7 now your average cost per unit is Rs. 8.5. that's what meaning averaging. this is the way you can minimize your loss.

3AVERAGING PRICE Empty Re: AVERAGING PRICE Fri Sep 16, 2011 12:08 pm

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
Normally I do not average the price unless market price has gone down by 17.5-20% & the quantity I buy roughly equals to 10- 15% of the total qty I had before.

But if you are dealing with a dodgy share, you have to be very very careful when it comes to averaging.



Last edited by UKboy on Fri Sep 16, 2011 12:32 pm; edited 1 time in total (Reason for editing : Added one more line)

4AVERAGING PRICE Empty Re: AVERAGING PRICE Fri Sep 16, 2011 12:10 pm

punter

punter
Stock Trader
@charith82 wrote:Once its going high averaging the price is not the correct concept. Average price concepts comes after you buying a stock if it going down dramatically.

eg if you bought 1000 X@10 your cost is nearly rs.10 per unit. (without taxes)
after it goes down to rs. 7 if u able to buy another 1000 X@7 now your average cost per unit is Rs. 8.5. that's what meaning averaging. this is the way you can minimize your loss.

thanks for ur consider about this matter. highly appreciated Very Happy Very Happy Very Happy
please advice me if u know the formula/calculation how to get avg price Question Question Question

and is it change on the quantity of the shares also Question Question Question

5AVERAGING PRICE Empty Re: AVERAGING PRICE Fri Sep 16, 2011 12:26 pm

charith82


Manager - Equity Analytics
Manager - Equity Analytics
its really simple . average cost per share calculated as total cost / number of shares. in my example.
you got 10 * 1000 = 10000.00
also got 7* 1000 = 7000.00 .
so total cost = 17,000.00
total shares you have = 2000
so average price = 17000/ 2000 = 8.5

pls note that in actual scenario average price will be little bit higher that that due to 1.12% transaction cost.

6AVERAGING PRICE Empty Re: AVERAGING PRICE Fri Sep 16, 2011 3:06 pm

ninja


Senior Equity Analytic
Senior Equity Analytic
Seems u r new to CSE. Averaging is not that easy as is in the book. When u decide to average ur cost, u need to take the biggest decision as when the bottom hits?

Lets say u baught X for 1000@10 = 10,000 cost is 10
X goes down to 9 n decide to avg the cost buy 1000@9 avg cost is 9.50
X goes further down n avg again buy 2000@8, avg cost is 8.75 ((1000x10+1000x9+2000x8)/4000)
This cycle may keep on repeating unless if ur call price to average is not correct.

If a share goes down like in the example above, there should be a reason for it. So better off not to average.

7AVERAGING PRICE Empty Re: AVERAGING PRICE Fri Sep 16, 2011 8:50 pm

gamaya


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Averaging down could be disastrous sometimes. For example if you first bought at 10. then stock goes down to 7. You buy more at 7. Then stock comes to 5. You again average at 5.

So what if stock price becomes 3. U might get a heart attack.

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