# How should FIFO affect the remaining average price?

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I recently asked IG a question about the FIFO netting method they use and how it affects the average price of your remaining position?  Maybe I will have better luck getting a clearer answer from the community.

I have the following example:

2 purchases:

1st: 8 units @ price 110

2nd: 8 units @ price 100

Therefore average price is 105 for 16 units purchased.

If I sell 4 units at 100, I assume that this sale should be netted against the 1st purchase of 8 units @ price 110, effectively meaning that this purchase is now worth 4 shares @ price 110 and I have realized a loss of of (4 x -10) = -\$40 which is reflected in my capital.

My portfolio  should be left with:

1st: 4 units @ price 110 (FIFO nets my sale of 4 units against my first purchase of 8 units @ price 110)

2nd: 8 units @ price 100

Therefore, the average price of the remaining 12 units is now 103.33.

I would like the community to let me know if this example is correct?  My issue is that, using the above example, when I sell 4 units in a real-life situation, IG does not adjust the average price of my position in my Portfolio.  IG continue to show my average price as 105.

Edited by CJ_Hughes
the text format changed when it was posted

Thanks for reaching out,

Assuming this is for share trading, I think the term average price can be misleading. In reality it is more of a average purchase price/ or average cost price. This does not change with each sale because ultimately your profit will be determined by the market value of your shares less your book cost. Book cost is determined by average price x number of shares.

Thus looking at your example, regardless of how many you sell. On average the shares cost you 105, i.e. When you sell 4 units, your average price remains 105. However your book cost will adjust from 1680 (105 x 16) to 1260 (105 x 12).

Having said this the book cost is editable, and this will automatically change the average price. So should you prefer you are welcome to edit it on your end to reflect your preferred valuation. Please details on how to this from the following link: https://www.ig.com/uk/help-and-support/investments/share-dealing-and-isas/how-do-i-edit-my-book-cost

All the best,

Anda

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