Calculate the blended average entry price and total size after adding to an existing position.
How this is calculated
Total cost = Σ (fill price × fill size) across every fill
Total size = Σ fill size
Average entry price = total cost ÷ total size
Open P&L (long) = (current price − average entry) × total size; reverse the sign for a short
Worked example
Long, 100 units at $50.00 plus 100 units at $40.00.
Total cost = 5,000 + 4,000 = $9,000.00 across 200 units.
Average entry = 9,000 ÷ 200 = $45.00, which is $5.00 below the first fill.
At a current price of $42.00 the open P&L is (42.00 − 45.00) × 200 = −$600.00.
Understanding averaging into a position
Averaging combines two or more fills into a single size-weighted entry price. The result is a weighted mean, so a larger fill pulls the average further toward its own price than a small one does. Adding this page's fills in any order produces the same answer, because only price and size enter the arithmetic — timing does not.
The break-even price and the risk are two different questions, and conflating them is the classic error. Adding to a losing long lowers the average entry, so a smaller bounce is needed to get back to flat. It also increases the total position, so every further dollar of adverse movement now costs more than it did before the add. The shift-from-first-fill line shows the first effect; the total size and open P&L lines show the second. Read them together, because on their own each tells a flattering half of the story.
Scaling into a winner uses identical arithmetic with the sign reversed in effect: the average entry moves up on a long, the break-even rises, and the open profit per unit falls even though the total position profit grows. This is why adding to strength should generally be sized smaller than the initial entry — otherwise a modest retrace can turn a comfortably profitable position into a losing one without price ever revisiting the original entry.
Before adding, the question worth answering is whether the second entry would be taken on its own merits with no existing position. If the answer is no, the add is being driven by the open loss rather than by the setup, and the average entry price is doing the persuading. Planned scaling is a position-sizing decision made in advance; averaging down into an unplanned loss is a risk-limit decision made under pressure, and the two produce very different distributions of outcome even when the arithmetic on this page looks identical.
The output is cost basis only. Commissions, spread paid on each fill, overnight financing on leveraged positions, currency conversion, and tax lot treatment are all excluded, and every one of them makes the real break-even slightly worse than the figure shown. For funded or evaluation accounts, also check the added size against the firm's drawdown limits before committing — a lower average entry is no defence against a rule breach.
Frequently asked questions
What does averaging down mean?
Adding to an existing position at a worse price than the original entry, which lowers the size-weighted average entry on a long.
Does a lower average entry reduce risk?
No. It lowers the break-even price but increases total position size and the cash exposed to further adverse movement.
Can I use this for scaling into a winner?
Yes. The weighted-average arithmetic is identical whether the second fill is above or below the first.
Are commissions included?
No. The result is a cost-basis average from the prices and sizes entered; fees are excluded.