Set a path, for example the portfolio should be worth $1,000 more each month. If after a month the balance is $10,400 against a target of $11,000, you contribute $600. If a rally leaves it at $11,300, you contribute only $700 minus the $300 excess, or in strict versions you sell $300.
Because contributions rise when prices fall, value averaging buys more cheaply than a fixed-amount plan and typically shows a lower average cost per unit. The trade-off is that required contributions are unpredictable and can spike exactly when an investor's income is under pressure.
It also forces selling in strong markets, which creates taxable gains and can leave the plan underinvested in a long uptrend. Cap the maximum monthly contribution in advance so the rule stays affordable.
Related: dollar-cost-averaging, lump-sum-investing, rebalancing, asset-allocation, tax-aware-rebalancing