Average Down / Cost Basis Calculator
Averaging down means buying more of a holding at a lower price so the average cost of the whole position falls. It lowers the price at which the position breaks even, but it does that by committing more money to a holding that is already losing — so it reduces the average, not the risk, and stakes more on the original reason to own it still being right.
New average = (shares₁ × price₁ + shares₂ × price₂) ÷ (shares₁ + shares₂). The break-even move from the latest price = new average ÷ latest price − 1 — how far the price must rise just to recover the combined position.
Worked example: Holding 100 shares bought at $100, then adding 100 more at $80, gives a $90 average and an $18,000 position in place of the first $10,000. From $80 the price must climb +12.5% to reach that $90 and break even — a gentler recovery than the +25% the first lot needed alone, but now carried on twice the money at stake.
A lower average is a bigger position, not a safer one: the break-even move shrinks only because more capital is exposed, and it says nothing about whether the asset recovers. Educational tool, not advice.
The lower break-even number is the draw, but it falls because exposure rose, not because the holding became sound — the same percentage decline now costs more in dollars. Adding to an asset that keeps falling loses more money in total, even as the lower average shrinks the percentage move needed to recover; the arithmetic cannot tell a temporary dip from a broken thesis.
How is a new average cost worked out after buying more?
Each lot's shares are multiplied by its price, the two are added, and the total is divided by all shares held. 100 shares at $100 plus 100 at $80 is $18,000 over 200 shares — a $90 average, exactly midway only because the two lots are equal in size; a smaller addition moves the average less.
How far must a price recover to break even after averaging down?
The new average divided by the latest price, minus one. From an $80 last price to a $90 average is +12.5% — less than the +25% the first lot alone required, yet the position now carries twice the capital, so that smaller percentage still has to be earned on a larger sum.
What does averaging down leave unchanged?
Whether the reason to own the asset still holds. The figure lowers the average and the break-even percentage, yet it adds money to a position moving against the holder and so raises total exposure — a mechanical cost-basis result, never a sign the price will turn.
A free, interactive calculator for any blog, newsletter or forum — same numbers as here, and it links back.
<iframe src="https://stratsemble.com/embed/tools/average-down-calculator" width="460" height="430" style="border:0;border-radius:12px;max-width:100%" loading="lazy" title="Average-down calculator — Stratsemble"></iframe>A calculator shows what a rule should do on paper. A backtest is how you find the rare few that actually beat simply buying and holding — costs on, losses shown, no look-ahead — so when you build one that survives, you'll know it isn't a fake edge, and can prove it forward before you risk real money. It won't tell you you'll win — nothing honest can.