>>>>Hi All,
>>>>
>>>>I have an interesting debate with some users of ours about how to calculate the average unit price for a stock bought and sold and bought again in various transactions at different price levels. So I put it to the market players in the forum for your input :)
>>>>
>>>>When we consider only BUY transactions then the calculation is quite simple: we simply add up the total cost of buying all the shares we have and divide by the total number of shares we have. However, the problem seems to get complicated when in between buying we also sell some shares. Then, later, perhaps even buy some back again. How to calculate the average unit prices now?
>>>>
>>>>Some websites indicate that we should sell off those shares that we first bought (first in, first out) and then re-calculate the average unit price based on the BUY transaction left. Each new BUY transaction changes the AUP, and each SELL transaction removes old BUY transactions from consideration as the shares are now sold.
>>>>
>>>>Other websites say that only BUY transactions affect the AUP. Simply add up all the costs to buy the shares, subtract the monies received from SELL transactions, and divide the net by whatever number of shares we have left.
>>>>
>>>>Below is a simple table of transaction. There are various BUY transactions (denoted by positive shares) and then some SELLS (denoted by negative shares), then some more buying and selling. What do you say the average unit price is at the end of these sequence of transaction and why?
>>>>
>>>>

>>>>Shares bought / sold	Buy / Sell Price	Shares Running Total
>>>>		
>>>>3700			1389			3700
>>>>5000			894			8700
>>>>5000			810			13700
>>>>6000			1000			19700
>>>>4200			1163			23900
>>>>1100			1182			25000
>>>>10000			910			35000
>>>>15000			777			50000
>>>>20000			856			70000
>>>>15000			976			85000
>>>>-35000			813			50000
>>>>-25000			742			25000
>>>>25000			833			50000
>>>>50000			829			100000
>>>>-50000			572			50000
>>>>-25000			553			25000
>>>>
>>>>
>>>>

>>>
>>>Basically, you should decide which accounting method to use: FIFO or LIFO and use it consistently. The difference between the methods will transpire on the each sell point, i.e. you calculate cost basis either based on first shares bought (historically, eliminated by subsequent sell transaction, FIFO) or last shares bought (before the sale, i.e. reduced in backward direction, LIFO).
>>
>>Thanks for the feedback Edward. So using FIFO when we sell we remove enough BUY transactions from the top of the list going down in order to satisfy the number of shares being sold. Then re-calculate the AUP based on the remaining BUY transactions up to the SELL record. Is that correct?
>
>Yes, IIRC, this is default method to record this kind of transactions.

This may or may not be relevant to your application, but I prefer to determine myself which buy/sell transactions match up. Particularly when dealing with multiple trades over multiple years.

Update : Following my response I re-read the initial post and I'm less sure my suggestion is relevant. If your looking for a way to calculate AUP as a measurement of performance over many accounts then I agree with Edward that either way is appropriate as long as you implement it consistently. My suggestion is geared more towards an individual account.