Comprehensive introduction of cost methods
Some tigers might notice TigerTrade V8.0.5 has launched a new cost method--average cost method. After updating to V8.0.5, tigers can choose among three costing methods: the average cost method, first-in first-out and diluted cost method. So what is the difference among the three different cost methods? What happens to the app after switching between different cost methods? Tiger Product Manager takes you to learn about the cost methods.
Currently TigerTrade provides three of the most widely-used cost methods, including average cost method, FIFO and diluted cost method. Tigers can select the cost method in 「Profile」-「Setting」-「Trade Setting」-「Position Setting」according to your preferences.
| Day | Action | # of Shares | Closing Price | Transaction Fees |
| Day 1 | Buy | 100 Shares APPL | $170 | $2 |
| Day 2 | Buy | 100 Shares APPL | $175 | $2 |
| Day 3 | Sell | 50 Shares APPL | $181 | $2 |
Note: Assuming that all transactions take place at the end of the day (i.e. Orders are executed at closing price)
The cost method apparently affects calculation of costs. However, does it further affect our p&ls' calculation? Before introducing p&ls, we want to mention a definition of holding period. TigerTrade takes the number of positions held at the end of the trading day as 0 for one holding period. If Tigers clear and then re-open the positions during the same trading day, the holding cost and total P&L of holding period will accumulate.
For frequently traded stocks, TigerTrade provides the following kinds of p&ls for Tigers to take a reference.
It is worth mentioning that, since the calculation of the dilution cost is to allocate the profit and loss of each transaction during the holding period to the holding cost, it is impossible to distinguish between the unrealized p&l and the realized p&l under this method.
After introducing p&ls, Tigers can also switch p&ls' display in「Profile」-「Setting」-「Trade Setting」-「Position Setting」according to your preferences. More detailed explanation about cost method can click info icon besides 「Cost Method」or inquire in the 「Help Center」.To ensure that Tigers refer to the accuracy and consistency of p&ls' under different cost methods, the p&ls of total assets and each market are accumulated by total p&l of holding period, which are not affected by the switching of cost methods.
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Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
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