Position sizing

The dip only counts if the average moves.

Averaging down is not a mood. It is a weighted mean. Add dollars at a lower price and watch the new cost basis, the bounce you still need, and mark-to-market P/L shift together.

Position & buy

New average entry

$64,438

Buying 38% below your old average. New lot: 0.2381 units. Need a 53.4% bounce to break even.

Buy

$42,000

New avg

$64,438

Old avg

$68,000

New quantity

1.7381

+0.2381 this buy

Cash added

$10,000

Cost of the new lot

Average change

-$3,562

Lower entry

P/L before buy

−$39,000

P/L after buy

−$39,000

At the mark-to-market price

Average-down formula

If you hold q units at average price p and buy q′ more at price p′, the new average is:

avg′ = (q · p + q′ · p′) / (q + q′)

When you enter a dollar amount instead of a quantity, q′ = spend / p′. A lower buy price pulls the average down; how much depends on size. A $500 add into a $50,000 position barely registers. Matching your existing cost basis in dollars at a 40% discount moves it a lot.

Break-even after the buy is simply the new average. If the asset is still below that line, the percentage bounce required is (avg′ − mark) / mark. That number is often larger than people expect, which is the point of watching it live.

Averaging down is not automatically smart. It concentrates risk in a name that already hurt you. The calculator does not know whether the thesis is intact — only what the new entry would be if you add size.