$1 breakout attempt #4, page-47

That's silly - of COURSE it reduces the average of the shares still held.

Just for the exercise:

buy shares at, say, 7c (number not specified)

SP rises, so buy more at 20 (smaller number, but enough), then more again at 40c, 80c, $1, $1.20. You get the idea. But by that time the average has risen to 80c, for the sake of this example.

Now, the SP rises to, say, $4, and some shares are sold - and the ones sold are nominated to be the $1.20 shares. Then, when the SP hits $6, more shares are sold - the $1 parcel. Then more sold at $5 - the 80c parcel. I'm sure you get the idea. My portfolio management osftware lets me nominate WHICH shares, from multiple buys, are the ones being sold each time.

But by this stage, the shares still held are back down to an average of about 40c (i.e. the large number of 7c shares, and smaller numbers of 20c, 40c, and 80c).

So the average cost of shares held has gone from 7c to 80c by pyramiding up, then back down to about 40c by selling (at profits) the more expensive shares. And this is without calculating back into the equation those profits taken, as that really doesn't count as cost of shares.

You can raise the average level of water in a bucket by pouring more water in. And you can lower the average by letting water out..!

The only variable factor in this whole example is that I can nominate WHICH parcels of shares are the ones being sold. If I'd nominated them as coming from the original 7c shares, then the average of the remaining shares would be higher. But to make best sense, you sell the most expensive shares (for a profit) - the only thing that matters is the money you get for them. And you leave yourself with the cheapest shares, with the opportunity to make profit on them even if the share price falls.

Hope that all makes sense. ;)