Personal Finance & Money Asked by Salam on July 31, 2021
I am really new to this and I need your help.
Let’s say I have 50k: I buy 100 shares of a stock, sell them at $5 profit for each share and do it again with 50K+plus.
How much I made on the last trade?
I can hypothetically keep doing this and buy a large number of shares, sell them for a profit of 5, and buy more when the price lowers by 5.
Now let’s say that stock is VOO, (stock that usually moves up and down 10 times a month).
How many times a month can I do this? Is there a limit to this?
If i start with 50k and I make 5k, next time I am doing this with 55k and will make more than 5k. This can easily increase relative to the number of shares that i buy.
I am really new to this and I need your help.
Here is help: you will lose. PERIOD. Stop doing that. Now, people will say "but with hard work blah-blah-blah". MATH says you lose - 95% of traders lose money, 1% or so make so much money they laugh at a Ferrari.
Let's say I have 50k: I buy 100 shares of a stock, sell them at $5 profit for each share and do it again with 50K+ plus. How much I made on the last trade?
Let's ignore the fact that you do not say how high the costs are and leave them at 0 - simple school math should tell you you can not know. Without knowing the price per share on purchase you do not know how many shares your purchased, so you can not know the profit. If you assume you do not use all the capital, you can solve it - you buy 100 shares, sell them for 5 USD profit each, VERY simple school math tells you that is 500 USD profit.
I can hypothetically keep doing this and buy a large number of shares, sell them for a profit of 5, and buy more when the price lowers by 5.
Yes, and if I can buy cars 10% below market value and sell them at market value and do so in large volumes I get rich too. Except no one will sell them to me at that price and I will not be able to sell an arbitrary large number.
In your case, you would have to wait for the stock to go down to your price, then up. You would have to predict that with quite a lot of certainty or you lose - BIG. And you would not be able to do that forever because you start being visible and changing the market.
Now let's say that stock is VOO, (stock that usually moves up and down 10 times a month). How many times a month can I do this? Is there a limit to this?
Sorry, you just told us it does so 10 times a month - then obviously you can do that 10 times a month. And if the stock changes behavior, YOU LOSE MONEY. Big time.
If I start with 50k and I make 5k, next time I am doing this with 55k and will make more than 5k. This can easily increase relative to the number of shares that I buy.
Yes, and then at some point you reach a volume that changes the market, you go into other shares etc. What is the question? That some people get really rich day trading? That is not a question, that is a proven fact. Look up the name "Paul Rotter" and his story. Look up the story of any number of good traders. Some amass LARGE fortunes - hundreds of millions.
Simplistic strategies often do not work, though, and chance is you simply do not have the makeup, mentally, to do it. And you oversimplify things to the point where the moment reality hits, you get destroyed - i.e. your idea of trading larger and larger size makes sure that the FIRST time you are bad, you lose a LOT - very badly - regardless how much money you have, because you keep permanently increasing your risk. You literally use an inverse martingale strategy where you increase risk on profit.
First rule of day trading: DO NOT DO IT. First rule of swing trading: Do not do it either. Chances are you lose. IF it works, you can make a TON of money. To the point you do not say "Oh, I want a Ferrari" but "nice, lets build a house that has space for a Ferrari collection, and a heli pad on top". But planning to do that - you have better chances becoming famous as a rock star.
Answered by TomTom on July 31, 2021
Here's a very similar question that was asked a few days ago: 2% gain-and-out trading plan on the stock market. Read the answers and the comments to get an idea of the feasibility of your idea.
Now let's say that stock is VOO, (stock that usually moves up and down 10 times a month). How many times a month can I do this? Is there a limit to this?
There's no limit to how many times a month (or even a day) you can do this other than does the ETF offer that many trading opportunities?
Since your premise is that you're going to take a position in the VOO and sell when it appreciates 5 points, I'm going to assume that you're going to wait for VOO to drop 5 points before you buy it again. If you bought VOO on 1/02/20, do you have any idea how many times you could have done this in 2020? THREE TIMES. A purchase in late February would have experienced over a 30% drop (90+ POINTS!) and it would have taken over 5 months to recover and make a $5 gain.
Now you could offer in return that you could have bought more shares as VOO dropped but you'd have to have some really deep pockets to keep buying more as VOO kept dropping as well as a crystal ball to know when it was a good time to buy more.
The graveyard of former wanna be traders is littered with people who tried such simplistic trading strategies.
Answered by Bob Baerker on July 31, 2021
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