MetenaCrypto average cost: definition, formula, example
The average price at which you bought an asset, fees included. Above that price, the position is in profit.
Definition
The average cost is calculated by dividing the total spent to buy an asset, fees included, by the number of units held. Each new purchase moves it: a purchase below the average cost lowers it, a purchase above raises it.
A partial sale does not change the average cost of the remaining units. It realises a gain or a loss on the units sold. Recalculating a lower average cost for the units you keep after a sale hides the real performance.
The average cost describes your situation and is not a reason to buy. Adding to a position because it has fallen below its average cost means letting a past price decide for you. The decision depends on your thesis and your rules.
Worked example
Three bitcoin purchases: 0.01 BTC at $60,000, 0.01 BTC at $50,000 and 0.02 BTC at $40,000, with $6 of fees in total. Spent: 600 + 500 + 800 + 6 = $1,906 for 0.04 BTC. Average cost: $47,650.
In Metena
Metena shows the average cost of each of your positions and the gap between the price and that cost. You can enter it or correct it yourself.
Notify me at launchRelated terms
- DCA (Dollar-Cost Averaging)
- Investing a fixed amount at regular intervals, for example every week, whatever the price. It smooths your entry price and stops you hunting for the “right moment”.
- Take-profit
- A price level set in advance, at which you sell all or part of a winning position.
- Money management
- Managing the size of your positions and your exposure: how much to risk per holding, what reserve to keep, which limits never to cross.
- Maximum drawdown
- The largest fall, as a percentage, from a peak to the low that follows. It measures what you must be able to withstand without abandoning your strategy.
Related guides
- When to sell your crypto: writing your exit plan
- Take-profit levels, stop, invalidation condition, rebalancing: four reasons to sell that should be written before buying, with worked examples.
Put these ideas into practice.
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Notify me at launchEducational content. It is not investment advice. Crypto-assets carry a high risk that can go as far as the total loss of capital.