You'll need confirmation. I believe its worked on your oldest buy trade. I'm not sure that there is any averaging involved. It's been awhile for me.

ie:

Trade 1 - Buy 1000 @ 2.00 $2,000 Paid

Trade 2 - Buy 1000 @ 2.30 $2,300 Paid

Trade 3 - Buy 1000 @ 2.50 $2,500 Paid

Trade 4 - Sell 1000 @ 5.00 $5000 Received

Cost - 2,000 (Trade 1)

Sold - 5,000 (Trade 4)

Profit - 3,000 (Difference)

I believe Capital Gains is on 50% of the profit, but I'm not sure if there's any limits or allowances now. Sorry if I have made any errors. It's what I remember. I beleive you add the 50% capital gains to your gross income on taxes and pay taxes at your "possibly" increased tax bracket level.