I used to hold 699 shares with avg 509.42 and brought another 23 shares @556 and i sold 354 shares on t1 ,surprisingly my average shown is 518.75 how does this avg value is calculated? This calculation showed 3k less profit.
Average Price = Total Invested Value ÷ Shares Bought.
Eg. You Buy:
Day 1: 100 Shares at 500 (Value 50,000, Avg Price 500)
Day 2: 100 Shares at 550 (Value 105,000, Avg Price 525)
Day 3: 100 Shares at 475 (Value 152,500, Avg Price 508.33)
Day 4: 100 Shares at 450 (Value 197,500, Avg Price 493.75)
On Day 5 you Sell, 200 shares at 540.
Ideally, you think you earn a profit of 9,250 (540 - 493.75 * 200) but this is not what happens. When you sell shares, First In First Out method is applied, by this logic shares bought on Day 1 and Day 2 will be sold.
Breakdown of your Sell transaction:
On Day 1 you bought 100 Shares at 500 and on Day 5 Sold at 540: You earn a profit of 4,000 on this (540 - 500 * 100)
On Day 2 you bought 100 Shares at 550 and on Day 5 Sold at 540: You book loss of 1000 on this (540 - 550 * 100)
Net: You earn a profit of 3,000.
Now there are 200 shares remaining in your holdings, those bought on Day 3 and Day 4 and their Average Price will reduce since those were bought at lower prices.
Day 3: 100 Shares at 475 (Value 47,500, Avg Price 475)
Day 4: 100 Shares at 450 (Value 92,500, Avg Price 462.5)
You can go to Console > Holdings and view the breakdown of stock you have bought at various prices and do the calculation yourself.
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Thnx @ShubhS9, this explanation shows that blindly seeing the kite position page and trading can create loss. Understanding the execution process is very important.