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A fair value tells you what it is worth. Not what to do.

Every valuation tool stops at a number. This one starts there. You bring what you think a share is worth; it works out what price to start buying at, how to split the purchase, where to give up, and how much money is on the line if you are wrong.

  1. You need one number to begin What you think one share is really worth. If you do not have it, work it out first with the free DCF calculator, then come back with the answer.
  2. You decide how careful to be How far under that value you want to buy, how much of your money this one holding may take, and how many goes you want to split it into.
  3. You get a plan, written down before you are tempted A price to start at, prices to add at if it falls further, a price to give up at, and the euro figure you stand to lose.

The boxes below are already filled with a made-up example so you can see it working. Type over anything.

Your numbers

Every box explains itself. Nothing is sent anywhere.

Not the market price — what you think the business is actually worth per share. The DCF calculator works this out for you.
Read it off your broker.
Your cushion for being wrong. 20% means you only start buying once the price is a fifth under your own estimate.
Everything you invest, not just this position. Used only to work out sizes.
The ceiling for this single holding, even if you love it.
Buying all at once assumes you know where the bottom is. Splitting it means the later buys only happen if it falls further.
8% means each next purchase waits for another 8% drop.
How much this share normally moves in a day, in currency. Your broker shows it as “ATR”, usually over 14 days. Roughly: average the daily high minus low over a few weeks.
3 means you accept three normal days of falling before you sell. Less and ordinary noise throws you out; more and you sit through a real collapse.

Where the price sits

 

 

 

Start buying at

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Total you commit

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Give up at

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Money at risk

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Each purchase is the same size here. Some systems make the later ones bigger; equal is the honest default when you have no rule of your own.
BuyPriceShares AmountSpent so far Your averageUnder your value

Why a ladder, and why a stop under it

Buying the whole position at one price assumes you know where the bottom is. You do not, and neither does anyone selling you a fair value. Splitting the position means the second and third fills only happen if the market goes against you — which is exactly when your average cost improves and exactly when most people freeze instead.

The stop is the part people skip. Averaging down without one is how a small mistake becomes the position that defines your year. A stop placed a multiple of ATR below the last tranche gives the position room to move in its own normal volatility, then closes it when the move stops being normal.

The number that matters on this page is at risk. Not the upside. If that figure makes you uncomfortable, the position is too big — shrink it before you argue with the valuation.

What this does not do

It does not check whether the business is any good. A cheap price on a deteriorating company is not an opportunity, and no ladder saves you from that. Run the fundamentals first — the DCF calculator is a start — and only then decide how to get in.

It also does not know your circumstances, your tax position, or what else you already hold. It is arithmetic on the numbers you typed, and it names no company.

Questions

What margin of safety should I use?

It depends on how much you trust your own fair value, not on a universal number. A stable, predictable business modelled conservatively might justify 15–20%. A cyclical or fast-growing one, where small assumption changes swing the answer wildly, needs far more — and if you need 50% to feel safe, that is the model telling you it is not confident.

How many tranches is right?

Two or three for most positions. More than that and each fill is too small to matter while the commission and the attention cost stay the same. One tranche is a legitimate choice if your entry level is already deep and you would rather be decisive than clever.

Why ATR for the stop rather than a fixed percentage?

Because a 10% move means something completely different in a utility and in a semiconductor stock. ATR — average true range — measures what a normal day looks like for that specific share. A stop set at a multiple of it adapts to the instrument instead of forcing every position into the same box.

Where do I get the ATR number?

Most charting tools and brokers show it as an indicator, usually over 14 days. Read the value off the chart and type it in. If you cannot find it, a rough stand-in is the average daily high minus low over the last few weeks.

Is this a recommendation to buy anything?

No. It is arithmetic on numbers you supplied, run entirely in your browser. Nothing is sent anywhere, no company is named, and no output here is a recommendation, advice, or a suggestion that any particular investment suits you.