Tracking Your Average Price

If you buy 100 shares at $50 and later buy 100 more at $60, your position's average price isn't the simple midpoint of the two trades you happened to make — it's the total cash spent divided by total shares held, which weights each purchase by its size. Buy 100 at $50 and 300 at $60, and your average price sits much closer to $60 than to $55, because the second, larger purchase dominates the weighted average.

Formally, average price is (sum of each fill's price × quantity) divided by total quantity currently held. Adding to a position recalculates this weighted average across all shares you now hold; trimming a position (selling part of it) does not change the average price of the shares that remain — you simply realize a gain or loss on the shares sold, using the existing average as the cost basis for that sale. Only new buys move the average.

This average price is your accounting cost basis, not your true break-even level: break-even also needs to account for commissions, borrow fees on a short position, and any dividends received or paid while holding. A position can show a "profit" against average price while still being a net loser once financing costs are included — which is why systems track average price and realized P&L as separate numbers rather than inferring one from the other.