How Do You Calculate Average Cost After Adding to a Position?

The key is coins added, not cash added

Dividing the amount added by the added price gives the new coins. This is the step people most often skip.

Add the quantities and the costs separately, then divide one total by the other to get the new average cost.

Formulas

Worked example (recompute it yourself)

Existing position: 0.5 BTC at an average of 40,000 USDT, so a cost of 20,000 USDT. With the price at 30,000 USDT you add 6,000 USDT:

Coins added = 6,000 ÷ 30,000 = 0.2, giving 0.7 coins and a total cost of 26,000 USDT.

New average cost = 26,000 ÷ 0.7 ≈ 37,142.86 USDT, about 2,857 USDT below the original 40,000.

Had you waited for 20,000 USDT and added the same 6,000 USDT: coins added = 0.3, total 0.8 coins, average cost = 26,000 ÷ 0.8 = 32,500 USDT. Same cash, lower entry price, more dilution.

How much to add to hit a target average

Rearranged: coins to add = (target average × existing coins − existing cost) ÷ (added price − target average), which applies when the added price is below the target and the target is below the original average.

Example: with 0.5 coins at a cost of 20,000 USDT, adding at 30,000 USDT to reach a 35,000 USDT average needs coins = (35,000 × 0.5 − 20,000) ÷ (30,000 − 35,000) = 2,500 ÷ 5,000 = 0.5, i.e. another 15,000 USDT.

Check: (20,000 + 15,000) ÷ (0.5 + 0.5) = 35,000 USDT, exactly the target.

Notes

A lower average cost is not lower risk: adding enlarges the position, so a further fall produces a larger loss in cash terms.

Fees are excluded above; including them raises the effective average cost slightly.

Average cost is a bookkeeping measure and says nothing about whether you should add.