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Why did buying more not fix the first price?
Each new buy mixes with the shares you already hold. The average moves toward the new price. If the price keeps falling past every ticket, every share is marked at the newest low, not at the average you were hoping would hold.
The short answer
Each new buy mixes with the shares you already hold. The average moves toward the new price. If the price keeps falling past every ticket, every share is marked at the newest low, not at the average you were hoping would hold.
The position
Here is one position (hypothetical, made-up prices). The count is 300 shares. The first figure in the story is $30. The later figure is $14.
| What you are looking at | Count | Price | Value | Versus the first total |
|---|---|---|---|---|
| The first total | 300 shares | $30 | $9,000 | $0 |
| After the price fell | 300 shares | $14 | $4,200 | −$4,800 |
The bottom row is this account. The −$4,800 is the gap. The price fell. Holding does not put the first figure back. These figures are made-up, so the subtraction stays checkable after the market moves.
Start with the count. 300 shares at $30 comes to $9,000. The later price is $14. The same count at that price comes to $4,200. Subtract. $9,000 minus $4,200 is $4,800. That is the whole table. It is not a fee hiding in the price, and it is not a forecast of tomorrow.
How to check it on the statement
Read the count first. Then read the price the statement used. Multiply those two yourself. If your product is not a share, multiply the point move by the contract size instead of multiplying a share price. The number you get should match the value in the table, or you are looking at a different count.
Write the first total on one line and the later total under it. The gap is a subtraction. Do not add a second story, such as a fee or a dividend, until you see that line on the statement. A missing line is a zero, not a guess.
If you sold part of the position, split the page into the cash that left and the count that stayed. Add those two. A sale of one piece does not freeze the price of the piece you kept.
If the order never filled, the statement still shows the old count. Look in the order history for a cancel, an expiry, or a limit the market never traded. The position page will not show an order that died.
Do this before you decide what the market "meant." The dollars are the count times the price you can point at. The reason can wait until those two numbers are written down.
What happened
The tickets were 100 shares at $40, 100 at $30, and 100 at $20. That is $4,000 plus $3,000 plus $2,000, so $9,000 for 300 shares. The average is $30. The price fell to $14, which is below every ticket, including the last one. The 300 shares are worth $4,200. Buying more lowered the average from $40 toward $30. It did not create a floor at $30. The third buy is in the loss too.
How to read a brokerage statement shows the count you still have and the price the statement used. It does not replay the order you meant to send. If the statement's count disagrees with this page, use the statement and do the subtraction again.
What this is not
A plan that says the average is a line the price will respect is a hope. The average is arithmetic. It does not pull the next trade up to it. This is three buys of the same shares. It is not three different companies, and it is not a hedge.
The account does not undo it
A TFSA or an RRSP changes the tax treatment of what is inside. It does not put the first price back. The shelter does not pay the gap back, and a lower price does not hand contribution room back. Room follows the contribution rules, not the chart. A taxable account shows the same mark. The wrapper decides tax. The count and the price decide the dollars.
If the custodian does not allow this product, the custodian's list wins over a general description. The math above is only for a position the account actually holds.
What to write down
- Every ticket, including the last one.
- The total dollars paid.
- The average, as a check, not as a floor.
- The later price on the full count.
Then subtract. If a step is missing, the gap on the screen is not explained yet. Do not fill the blank with a rate, a fee, or a yield you did not read off a statement or a contract spec.
Questions
Is $30 a floor? No. It is the average of what you paid. The price fell to $14.
Did the third buy help? It lowered the average. Then the price fell below $20, so the third buy lost money too.
Should I keep buying? This page does not answer that. It prices the three buys you already have.
Does a TFSA treat the average as protected? No. The shelter does not hold the price at the average.
Are these the live prices? No. They are hypothetical, so the −$4,800 stays checkable.
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