What it is
The average down calculator computes your new average entry price and total exposure when you purchase additional units of an asset at a lower price to bring down your overall break-even point.
Why it matters
When a trade goes against you, buying more units at a lower price reduces the price recovery needed to reach break-even.
Why traders use it
Traders and investors evaluate whether adding to a losing position makes mathematical sense or increases risk dangerously.
How important is it?
Warning: Adding to a losing trade (averaging down or Martingale style) can increase losses quickly if the asset continues falling. Use with extreme caution.
Worked example
With 10 units held at an average price of $100, adding another 10 units at $80: total units equal 20, total cost equals $1,800, resulting in a new average price of $90.
Common mistakes
- Averaging down indefinitely on declining assets without a strict stop-loss limit.
- Risking too much capital on a single trade that is already underwater.
Frequently asked questions
What is the formula for calculating a new average price after buying more?
Multiply your existing units by your old average price, add (new units multiplied by the new buy price), and divide by your new total units: ((U1 * P1) + (U2 * P2)) / (U1 + U2).
How much does the price need to bounce to reach my new break-even point?
Look at the "Rise from new buy price to break even" result in the calculator. In the default example ($100 averaged down at $80 to a $90 average), price only needs to bounce 12.5% from $80 to $90 instead of 25% to $100.
Is averaging down safe for leveraged forex or crypto futures?
Averaging down on leveraged positions is dangerous because it increases your total position size and pulls your liquidation price closer unless you also add extra margin.
Related trading guides
What Is Drawdown and Why Recovery Gets Harder
See how a trading drawdown is measured, why the gain needed to recover grows faster than the loss, and how to limit deep drawdowns.
How to Calculate Position Size, Step by Step
A simple four-step method to work out your lot size from your account balance, risk percentage and stop loss, with worked examples.
This page is for education only and is not financial advice. See our disclaimer.