Buy Average Calculation1 min readReading Time: < 1 minute
Buy average will be calculated based on the First In First Out (FIFO) method for the delivery trades, the shares which were bought first will be netted-off against the sell transaction that you make.
Buy average includes the brokerage and other charges which were levied on a given transaction. This will help you to know the Break-even price in order to book profits.
Please refer to the below example to understand the logic.
Since the shares which were bought on 12-Feb-2021 act as the First In, the same will be debited from your holdings when you make a sell transaction, and the updated average price will be 22.045 for the remaining 300 shares.
If a particular stock is bought multiple times in a day, then all the buy transactions will be averaged and will show up the day’s weighted average price.
Attached the example below.