Futu Securities cost price algorithm, which one is the default for Hong Kong brokers and domestic brokers?

Fri, 08 May 2026 23:45:20 +0800

Regarding this problem/issue from Futu, I will state the conclusion first.

Futu Securities currently defaults to displaying cost-averaging, which is not what many people understand as simply calculating an average based only on buys and ignoring sells. Extending this concept further, Hong Kong brokers do not have a unified default methodology. If it is a holdings page aimed at Chinese retail investors, common display methods include cost-averaging, average cost, and breakeven price (or principal protection price). However, if the broker is an international firm like IBKR that places more emphasis on tax lots and statement consistency, FIFO (First-In, First-Out) is generally the default method.

When discussing domestic brokerage firms, if we refer to the most common field in A-share trading clients—the “Cost Price/Holding Cost Price”—it is more commonly focused on the diluted cost basis or break-even price, rather than simply the average purchase price. This is just because different brokerages do not have standardized naming conventions; some call it “holding cost,” others call it “diluted cost,” and some provide a separate figure for the “average purchase price.”

Let’s first break down the three concepts

These three terms are often used interchangeably, but they are not the same.

Basis	Core Logic	Will it change after selling?	Common Usage
Average Cost	Looks only at purchases, ignores the effect of selling on remaining positions	Usually no	Viewing the pure average buying price
Averaging/Break-even Price Maintenance	Allocates historical gains/losses from sales back to the remaining position	Yes	Displaying “how far from break-even” on the holding page
FIFO (First In, First Out)	Sells what was bought first, matched by lot	Yes, but the logic is lot matching	Statements, taxes, realized/unrealized gains/losses

If you just want to see “what the approximate cost of my remaining stocks is,” average cost is the most intuitive.

If your concern revolves around calculating how far your current holding is from the break-even point after engaging in frequent, short-term trades on a stock, then cost averaging techniques are more directly applicable.

If you are concerned with knowing exactly which old position/lot was sold first, that is no longer just a front-end holding display issue; it becomes an underlying lot matching problem like FIFO.

What is Futu’s current default type?

I checked the Futu Hong Kong Help Center and the Futu NiuNiu Help Center on May 8, 2026, and obtained two definite facts.

Firstly, the Futu Help Center separately explained two algorithms: Amortization Cost Price and Average Cost Price.

\[ \text{Adjusted Cost Price}=\frac{\text{Total amount bought during holding period}-\text{Cash dividends}-\text{Total sales proceeds}}{\text{Quantity held}} \]

\[
\text{Average Cost Price}=\frac{\text{Previous Average Cost Price}\times\text{Quantity}+\text{Current Buy Price}\times\text{Quantity}}{\text{Total Holding Quantity after Purchase}}
\]

Futu NiuNiu’s “Holding Field Introduction” page directly labels the stock holding field as Cost Price (Diluted Cost). The formula provided on this page does not incorporate cash dividends, focusing instead on explaining the display logic of the holdings page. However, both the HK Help Center’s “Cost Price Introduction” and “FAQ” include cash dividends in their formulas. While the descriptions differ slightly, the core methodology is consistent: both reflect Diluted Cost, rather than simply the average purchase price.

Secondly, Futu writes more directly in its “FAQ”: “Futu currently uses the weighted average cost price.” It also explains a phenomenon that many users might be confused by: when the selling amount is greater than the buying amount, but there are still remaining positions in the account, the cost basis can become 0 or even negative.

This fact itself indicates that Futu’s default display is not based on “average cost,” but rather uses a metric that has incorporated/accounted for historical realized gains and losses from selling.

So, if the question is “What is Futu Securities’ default cost basis algorithm?”, the answer is quite straightforward: It defaults to average cost basis.

What standard type do Hong Kong brokerage firms default to, which is too complex to define simply?

Many people tend to treat “Hong Kong securities firms” as a single entity, which is an imprecise statement.

The few examples I found show that it is not uniform.

Brokerage / System	Method Found	Conclusion
Futu	Currently uses cost basis averaging	Default bias toward cost basis averaging
Tiger Brokers	Clearly distinguishes between average cost, FIFO, and cost basis averaging, and supports selection in settings	Not covered by a single default logic
IBKR	Tax lots default to FIFO, with the option to change the default match method	Default bias toward FIFO

Tiger Securities’ help center is quite informative. It separately lists Average Cost, FIFO, and Weighted Average Cost, and provides different results for the same set of trades under three algorithms. Furthermore, on the “Realized Profit/Loss” and “Unrealized Profit/Loss” pages, Tiger clarifies that the results differ between FIFO and average cost methods, and users can select them in the settings.

What does this mean?

The question of which type Hong Kong securities firms default to is highly likely to lead to biased conclusions if a specific brokerage firm is not first specified.

My judgment is as follows:

In the context of Chinese-language retail brokerage apps, such as Futu or Tiger, the common practice revolves around presentation metrics related to holdings, including averaged cost basis, average cost, and breakeven price.
For international brokers like IBKR, in reporting and tax contexts, FIFO (First-In, First-Out) is generally the more common default method.
Therefore, stating that “Hong Kong brokers default to FIFO” or that “Hong Kong brokers default to averaging cost basis” is inaccurate. The correct statement must specify both the particular broker and the specific page/context.

Which type is more commonly used by domestic brokers?

If we narrow the scope to the most common “Cost Price” field found on A-share brokerage client platforms, my conclusion is:

Domestic brokerages are more likely to focus on cost averaging / capital preservation, rather than simply buying at an average price.

Guoxin Securities wrote this definition very clearly a long time ago. Its “holding cost basis” algorithm is:

\[ \text{Average Holding Cost Price}=\frac{\text{Total funds used for purchases during holding period}-\text{Total funds obtained from sales during holding period}}{\text{Number of available shares}} \]

The key point of this formula is that the selling amount will inversely affect the remaining holding cost. This is no longer simply the average purchase price; it clearly leans closer to the idea of averaging down costs.

If we look at Industrial Securities and Yangtze River Securities, they are more granular in their definitions/metrics. They explain “average purchase price,” “cost basis of holdings,” “averaged cost,” and “break-even price” separately. Especially Yangtze River Securities, they directly state that their own cost types are divided into four categories.

This conversely shows two things.

Firstly, domestic securities brokers are not incapable of calculating average cost; rather, they often use the average cost as a separate field, and do not necessarily treat it as the default “cost price.”

Secondly, domestic brokerages pay more attention to displaying ‘how far the current holding is from breaking even’ in their front-end user interface, which makes it easy for them to incorporate the impact of selling into the displayed cost basis. This approach is actually closer to Futu, rather than IBKR’s lot accounting logic.

Why Many People Feel That “The Cost Price Is Wrong”

It is usually not that the broker calculated it incorrectly, but rather that your definition of “cost basis” in your mind is not the same thing as the “cost basis” shown on the brokerage platform.

The three most common errors are.

Type One: Interpreting based solely on the average buying price

I think that after selling off a portion, the cost basis of the remaining position shouldn’t change.

This is only valid based on the “average cost” metric/basis.

However, if the broker displays the adjusted/average cost basis, then the profits from your previous sales will indeed lower the cost of your remaining holdings; conversely, losses from previous sales will raise the cost of your remaining holdings.

Secondly, conflating the criteria for displaying holdings with the report criteria

The App’s holdings page might be showing you the averaged cost basis.

However, the monthly statements, tax forms, and allocation of realized gains/losses may be processed using FIFO or other lot matching rules.

These two metrics are not necessarily consistent.

Third kind: Corporate Actions, Portfolio Reallocation, Dividends, and Stock Splits

This kind of scenario is the most prone to miscalculating/confusing the cost price.

Futu and Tiger have warned in their Help Centers that, “Corporate Actions, and cost basis after transactions are for reference only and may be inaccurate.” This reminder is very important because many users treat the front-end display as the definitive accounting ledger, which can lead to greater confusion.

My Conclusion

To wrap up. / Let’s summarize the end.

If you are referring to Futu:

Futu Securities currently defaults to the average cost basis.

If you are referring to the overall picture of Hong Kong securities firms/brokerages:

No standardized default algorithm.
Futu tends to average/dilute the cost basis.
Tiger supports switching between multiple cost algorithms.
International brokers like IBKR’s default tax lot calculation leans more toward FIFO.

If you are referring to the entire domestic brokerage industry:

More commonly, it follows a focus on cost averaging / maintaining the initial principal cost.
The “average purchase price” usually exists, but it is often in a separate field and is not necessarily the default displayed “cost price.”

To really avoid misjudgment, the most reliable method is not to memorize broad conclusions like “which type of brokerage Hong Kong uses by default” or “which type of brokerage mainland China uses by default,” but rather to look directly at these three questions:

Does this page display the “Holding Cost,” “Average Purchase Price,” or “Break-even Price”?
Will selling transactions affect the cost basis of the remaining position?
Is this metric for front-end display, or is it a report/tax lot standard?

If you understand these three points, you generally won’t be misled by cost pricing discussions again.

References

Writing Notes

Original Prompt

Futu Securities’ cost basis algorithm; which one do Hong Kong brokers default to? Which one do domestic brokers default to?

Writing Outline Summary

First, separate Average Cost, Diluted Cost, and FIFO bases to avoid mixing concepts at the start.
Address the most specific question regarding Futu first, and then expand to Hong Kong brokers and domestic brokers.
For the section on Hong Kong brokers, do not provide a “one-size-fits-all” conclusion; instead, clarify the differences using three examples: Futu, Tiger, and IBKR.
In the section on domestic brokers, focus on explaining that “Default Cost Price” and “Average Purchase Price” are often not in the same field.
This article intentionally avoids detailing tax declaration procedures because the core issue raised by users concerns the standards for displaying holdings, not tax filing treatment.

Extended Brainstorming

Topic	Whether to include in main body	Reason
IBKR’s default FIFO	Included	Helps readers understand that “Hong Kong brokers” internally differentiate between retail holding displays and international tax lot calculations.
Tiger’s multiple algorithm switching	Included	Proves that the way “Hong Kong brokers” default cannot be generalized.
Whether all domestic brokers default to cost averaging	Not drawing a definitive conclusion	Evidence shows this is common, but different brokers have naming and implementation variations; it is unsuitable to state definitively.
Stock Connect cost basis	No	Charles River Securities explicitly warns that its cost price calculation is not applicable to Stock Connect; expanding on this will deviate from the main theme.
Tax filing and cost basis	No	Helpful for understanding the current issue, but it will shift the article from holding display issues to tax handling issues, becoming too tangential.

Cost Price on Uncle Xiang's Notebook