How to find the number of shares to buy to average to current price?

nalakaum

nalakaum

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Dear all,

I am new to the share market world. And already making losses Embarassed

Is there a formula to find out the number of shares to buy to get the average price to the current market price?

For example, I have 80,000 FLCH shares with average price @ 1.99; the current market price is 1.40; So, in this situation, how many shares should I buy @ 1.40 to bring the average price to come down to 1.40? Is there a formula for this?

Many thanks.

NewInvestor

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nalakaum wrote:
For example, I have 80,000 FLCH shares with average price @ 1.99; the current market price is 1.40; So, in this situation, how many shares should I buy @ 1.40 to bring the average price to come down to 1.40? Is there a formula for this?
Many thanks.

you cannot, you have to buy lower than 1.40 to average at 1.40. Please search the forum for 'stock calculator'. You can calculate average price there as I recall.

Whitebull

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Averaging is tricky bussiness.One or two occassions you may be successful but there is very good chance that all ur lot can stuck in one share.

There are lot of interesting articles on averaging in the forum.Search and read them or else u can learn it in hardway the way u would never forget it.

K.Haputantri

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Read this link- http://forum.srilankaequity.com/t6611-averaging-the-buy-price-to-minimize-risk-a-common-mistake-of-stock-traders#44591

NewInvestor

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Whitebull wrote:Averaging is tricky bussiness.One or two occassions you may be successful but there is very good chance that all ur lot can stuck in one share.

There are lot of interesting articles on averaging in the forum.Search and read them or else u can learn it in hardway the way u would never forget it.

Most popular mistake is treat the whole quantity as one, other than separate blocks.

Whitebull

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NewInvestor wrote:

Whitebull wrote:Averaging is tricky bussiness.One or two occassions you may be successful but there is very good chance that all ur lot can stuck in one share.

There are lot of interesting articles on averaging in the forum.Search and read them or else u can learn it in hardway the way u would never forget it.

Most popular mistake is treat the whole quantity as one, other than separate blocks.

Could you furthur explain how you seperate the blocks ?

NewInvestor

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Whitebull wrote:

NewInvestor wrote:

Whitebull wrote:Averaging is tricky bussiness.One or two occassions you may be successful but there is very good chance that all ur lot can stuck in one share.

There are lot of interesting articles on averaging in the forum.Search and read them or else u can learn it in hardway the way u would never forget it.

Most popular mistake is treat the whole quantity as one, other than separate blocks.

Could you furthur explain how you seperate the blocks ?

Sorry if confused, it's not really averaging when you do that. Smile

Whitebull

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NewInvestor wrote:

Whitebull wrote:

NewInvestor wrote:

Whitebull wrote:Averaging is tricky bussiness.One or two occassions you may be successful but there is very good chance that all ur lot can stuck in one share.

There are lot of interesting articles on averaging in the forum.Search and read them or else u can learn it in hardway the way u would never forget it.

Most popular mistake is treat the whole quantity as one, other than separate blocks.

Could you furthur explain how you seperate the blocks ?

Sorry if confused, it's not really averaging when you do that.

Exactly right.That is what I want to point out.

smallville

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NewInvestor wrote:

Whitebull wrote:

NewInvestor wrote:

Whitebull wrote:Averaging is tricky bussiness.One or two occassions you may be successful but there is very good chance that all ur lot can stuck in one share.

There are lot of interesting articles on averaging in the forum.Search and read them or else u can learn it in hardway the way u would never forget it.

Most popular mistake is treat the whole quantity as one, other than separate blocks.

Could you furthur explain how you seperate the blocks ?

Sorry if confused, it's not really averaging when you do that.

Averagin is bringing down the price, so either u treat it as a whole or chunks is up to u..

The chunk method allows u to sell it at various prices so that u eventually make a profit, i.e. in the above case of FLCH, he bought 80K @ 1.90 and if he furhter buys 80K @ 1.40, avg is (1.9+1.4)/2 = 1.65 for 160K shares (ignoring the broker fees for simplicity).
So selling the lot at 1.80 or 1.90 still is a profit..

On the other hand if he wishes to sell the newly bought 80K lot above 1.90, the profit can compensate the loss incurred in buying 80K @ 1.90.
Then he can opt to keep the initial lot to see whether the price is progressing upwards..

While averagin down is not the best strategy, ppl still use to do this to bring down the price, at least to overcome the mentality of losing.. However, one should remind himself that its an oppertunity loss to do so cuz the counter ur averaging keep coming down or stagnated ur losing a potential trade oppertunity or a short term investment oppertunity on another counter Wink

nalakaum

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Dear all,

Thanks a lot for your insight of the issue; indeed valuable advices for me.

BTW, an accurate formula is yet to find, I guess.

NewInvestor

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nalakaum wrote:Dear all,

Thanks a lot for your insight of the issue; indeed valuable advices for me.

BTW, an accurate formula is yet to find, I guess.

Check this...
http://forum.srilankaequity.com/t17692-profit-loss-calculator?highlight=calculator

sriranga

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Ignoring Broker Commission and other bits for basic calculation, you can use following Formula.

How to find the number of shares to buy to average to current price? Eq10

Note: As previously NewInvestor said you need to buy lower than the target price.

chamith

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If you got DFN, go to the portfolio and right click on the share that you want to average. And then click 'Average cost calculator'. @ here u can calculate

1. with x number of shares brought at current price, how much ur new average cost will be.

2. To get ur desired average cost, how many shares should be brought @ current price.

Redbulls

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Thanks Sriranga for the simple table and Chamith for the info.

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How to find the number of shares to buy to average to current price?

1 How to find the number of shares to buy to average to current price? Tue Jun 12, 2012 10:47 am

nalakaum

2 Re: How to find the number of shares to buy to average to current price? Tue Jun 12, 2012 10:56 am

NewInvestor

3 Re: How to find the number of shares to buy to average to current price? Tue Jun 12, 2012 11:03 am

Whitebull

4 Re: How to find the number of shares to buy to average to current price? Tue Jun 12, 2012 11:06 am

K.Haputantri

5 Re: How to find the number of shares to buy to average to current price? Tue Jun 12, 2012 11:10 am

NewInvestor

6 Re: How to find the number of shares to buy to average to current price? Tue Jun 12, 2012 11:19 am

Whitebull

7 Re: How to find the number of shares to buy to average to current price? Tue Jun 12, 2012 11:32 am

NewInvestor

8 Re: How to find the number of shares to buy to average to current price? Tue Jun 12, 2012 11:38 am

Whitebull

9 Re: How to find the number of shares to buy to average to current price? Tue Jun 12, 2012 12:34 pm

smallville

10 Re: How to find the number of shares to buy to average to current price? Tue Jun 12, 2012 1:01 pm

nalakaum

11 Re: How to find the number of shares to buy to average to current price? Tue Jun 12, 2012 2:27 pm

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sriranga

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14 Re: How to find the number of shares to buy to average to current price? Tue Jun 12, 2012 4:42 pm

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