Is this true about trading?

[Persson121]

I found this very easy but I can't belive that is true, or not.

For exampel. I do like this.
1. I have 1000 dollar(just in this case)
2. I buy shares for all the money. One share is 2.5 dollar each.
3. I pay the courtage to the stockbroker. The courtage is 5 dollars.
4. The price went up to 2.6 dollar per share.
5. I sell all me shares for 2.6 dollar each.
7. I pay the courtage to the stockbroker. 5 dollars agin.
8. Now i have make a profit.
9. I do everyting agin, but now i have more money to buy the same shares.

My profit is 90 dollars, but is it ture? Do i have calculate wrong?
Im very sure that i have calculate it wrong, but i cannot se how to calculate it "right".
Is there any mathforumula for this?

How did you do when you count how mutch profit you can make if you have X money, and the price is Y?

 

[trendie]

You have $1000.
You buy shares, they are $2.50 each.
You have bought 400 shares. (400 x 2.50 = 1,000)

The shares go to $2.60 per share.
You gain 10c per share.
10c on 400 shares = gain of $40.

Out of this you pay "courtage".
I don't get where the profit of 90$ comes from?

 

[new_trader]

That isn't entirely correct. The courtage is paid from the $1000. If you want 400 shares, you need $1005-

 

[tomorton]

It's not clear if you have remembered the spread as well. When you see a share quoted on a website or in a newspaper at $2.50 each, this is actually the mid-price, the price mid-way between the price at which you can buy it and the price at which you can sell it. So, a share quoted at $2.50 will possibly cost $2.55 to buy but would bring only $2.45 if you were selling.

You should also think about tax. In the UK and many other countries, there will also be tax when you buy the shares (in the UK this is called Stamp Duty and is 0.5%.

So, if you have $1000.00 to spend, you will be able to buy 388 shares at $2.55 = $989.40: if tax is due and is 0.5%, that will cost $4.95, plus commission of $5.00 = $999.35.

Assuming there is no tax to pay on sale, but commission will be $5 again and the spread remains the same, you would need the shares to rise to mid-price $2.74 just to break even.

 

[Persson121]

It's not clear if you have remembered the spread as well. When you see a share quoted on a website or in a newspaper at $2.50 each, this is actually the mid-price, the price mid-way between the price at which you can buy it and the price at which you can sell it. So, a share quoted at $2.50 will possibly cost $2.55 to buy but would bring only $2.45 if you were selling.

You should also think about tax. In the UK and many other countries, there will also be tax when you buy the shares (in the UK this is called Stamp Duty and is 0.5%.

So, if you have $1000.00 to spend, you will be able to buy 388 shares at $2.55 = $989.40: if tax is due and is 0.5%, that will cost $4.95, plus commission of $5.00 = $999.35.

Assuming there is no tax to pay on sale, but commission will be $5 again and the spread remains the same, you would need the shares to rise to mid-price $2.74 just to break even.

Thats news to me. Thank you.
I know about the tax but i didin't count with it beacuse i live in Sweden.
In Sweden we have something called capitalensure(kapitalförsäkring), which allows traders to not tax on the shares. But then the bank owns the shares and take care of them. But you cannot vote with them beacuse it's not yours, only the bank, but you can sell them.

But why would it do that? I mean, why can't the realtime qoute be the real price of the share? So if i want to buy a share for 2.45, i need to buy it with higher price to buy it, and sell i need to step down in price to get the share sold?
Is this a rule or just how the markets works?

 

[Persson121]

You have $1000.
You buy shares, they are $2.50 each.
You have bought 400 shares. (400 x 2.50 = 1,000)

The shares go to $2.60 per share.
You gain 10c per share.
10c on 400 shares = gain of $40.

Out of this you pay "courtage".
I don't get where the profit of 90$ comes from?

Ok. Now i get it.
I have 1000$ and for that i can buy 398 shares if the commission is 5$ and the price is 2.50$ each share.
Then i hopefully get all my shares sold for 2.60$.
398*2.60-5 = 1029.8$.
So a profit of like 29$.

Then the next trade the profit will be
1060.792 - 1029.8 = 30$

The 3th day the profit will be
1093.02368 - 1060.792 = 32.23$

Do i hunt for smal potatoes? Or is this big hard business to make all shares sold after the price has rise 0.1$?
Well im happy if that was true.

 

[rathcoole_exile]

Or is this big hard business to make all shares sold after the price has rise 0.1$?
Well im happy if that was true.

and what's your plan if the stock price drops 0.1$ rather than rising ?
or drops 0.2$
or drops 0.3$ etc etc?

 

[tomorton]

Thats news to me. Thank you.
I know about the tax but i didin't count with it beacuse i live in Sweden.
In Sweden we have something called capitalensure(kapitalförsäkring), which allows traders to not tax on the shares. But then the bank owns the shares and take care of them. But you cannot vote with them beacuse it's not yours, only the bank, but you can sell them.

But why would it do that? I mean, why can't the realtime qoute be the real price of the share? So if i want to buy a share for 2.45, i need to buy it with higher price to buy it, and sell i need to step down in price to get the share sold?
Is this a rule or just how the markets works?

Personally, I have never worried about voting rights with my shares, because I don't care how the company is run, I just want the shares to rise in price. In any case, I could never own enough shares for my votes to be big enough to make a difference.

Shares are offered for sale by companies who have to buy them from someone else, they can't just print some more when they want to. And of course, if they sold them at the same price they bought them, there wouldn't be any profit, so there would be no point doing it. It's like your car - if you want to buy a new car from the dealer, it will cost you $X,000, but if you take it back the next day because you now need the money to buy something else (like shares!), the dealer would not ber expected to give you $X,000.

But, as rathcoole_exile suggests, it's more important to know when to sell than to know when to buy.

 

[Persson121]

and what's your plan if the stock price drops 0.1$ rather than rising ?
or drops 0.2$
or drops 0.3$ etc etc?

That would i call; plan B
My plan B is to learn about my wrong "calculations" about buying in right time and right place. I know that if the stock price drops 0.1$ i have to waint and don't get panic.
Just analyse the market status if it's high volatility or it's a down trend.
If it's a down trend i just sell fast as possible.

I can accept that i loose sometimes.

 

[Persson121]

Personally, I have never worried about voting rights with my shares, because I don't care how the company is run, I just want the shares to rise in price. In any case, I could never own enough shares for my votes to be big enough to make a difference.

Shares are offered for sale by companies who have to buy them from someone else, they can't just print some more when they want to. And of course, if they sold them at the same price they bought them, there wouldn't be any profit, so there would be no point doing it. It's like your car - if you want to buy a new car from the dealer, it will cost you $X,000, but if you take it back the next day because you now need the money to buy something else (like shares!), the dealer would not ber expected to give you $X,000.

But, as rathcoole_exile suggests, it's more important to know when to sell than to know when to buy.

Yes i know. But I have always wondered if it's easy to buy shares and sell shares if it's a downtrend or uptrend?
The traders dosen't see or know eachother. The selltrader just made an order and the buytrader made an order to, but how do i know that the price might be to gett shares sold? Is it 0.05 less that the mid-price?

 

[tomorton]

It can be difficult at some times to buy / sell shares in very small companies, such as when you want to buy / sell a lot of shares in very small companies when the share price is moving very fast: the shares are siad to be illiquid. At such times, if your order is accepted, the spread may be much wider than usual. The bigger the company, the narrower the spread and the more liquid the shares.

Normally, when you place an order with your broker, it can be to trade at a price you tell them or to buy 'at the market'. If the share does not reach your specified price, the order will not be executed. But a trade ordered at the market will be carried out as soon as the broker can do it, at whatever price the share has reached at that moment.

 

[Persson121]

It can be difficult at some times to buy / sell shares in very small companies, such as when you want to buy / sell a lot of shares in very small companies when the share price is moving very fast: the shares are siad to be illiquid. At such times, if your order is accepted, the spread may be much wider than usual. The bigger the company, the narrower the spread and the more liquid the shares.

Normally, when you place an order with your broker, it can be to trade at a price you tell them or to buy 'at the market'. If the share does not reach your specified price, the order will not be executed. But a trade ordered at the market will be carried out as soon as the broker can do it, at whatever price the share has reached at that moment.

But in the top 50 volume leaders in US market. It will go fast to sell shares in big quantities?

So if i buy in a uptrend and im 100% sure that the price will rise in a few days to +0.1$. I tell the broker to sell it for me. Do i only need to pay the commission once then?

 

[tomorton]

You can't be 100% sure price will do something.

Commission is paid both times, on buying and selling.

 

[Persson121]

You can't be 100% sure price will do something.

Commission is paid both times, on buying and selling.

No. Im never 100% in trading.
Okej, i though you mean that i can pay commission just one if i told the broker that i want this sold for x dollar.