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Profitability of short-term trades? Post Reply Rate topic
cathylmg Elite	20-May-2009 15:55        cathylmg About Contact  Quote this Post!
x 0   x 0  Alert Admin	Not to mention the extra brokerage fee incurred when you buy sell buy sell frequently. Trading is only for people who has the time to watch the market and who has a very very calm state of mind. Because a wrong decision executed could be very very costly. Stopping of losses just before market changes direction could also cost your dearly. But no want can have a sure fire way of knowing which direction it could take. So my take is during an uptrend, buy on dip. jeremyow      ( Date: 20-May-2009 15:17) Posted: Thanks for correcting my calculation mistake. Yes. Person A will make $5000 which is more than person B who makes $4000. Trading is potentially more lucrative than buy-and-hold. However, person A has to be accurate in his prediction to get this higher returns. It is no wonder why many people will want to trade short-term as it is potentially more lucrative. Cutting loss therefore becomes a necessary skill to defend against price movements which do not favour the trader. Thus, the old adage for traders is to "cut loss promptly to minimise losses and ride the winners". Those that can stick to this mantra makes good traders. I believe the only trade-off is the inconsistencies in trading as it depends on market movements which are unpredictable.
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jeremyow Senior	20-May-2009 15:17        jeremyow About Contact  Quote this Post! Style: Flexible   Mood: Yells: "Passionate business investor"
x 0   x 0  Alert Admin	Thanks for correcting my calculation mistake. Yes. Person A will make $5000 which is more than person B who makes $4000. Trading is potentially more lucrative than buy-and-hold. However, person A has to be accurate in his prediction to get this higher returns. It is no wonder why many people will want to trade short-term as it is potentially more lucrative. Cutting loss therefore becomes a necessary skill to defend against price movements which do not favour the trader. Thus, the old adage for traders is to "cut loss promptly to minimise losses and ride the winners". Those that can stick to this mantra makes good traders. I believe the only trade-off is the inconsistencies in trading as it depends on market movements which are unpredictable.
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Hulumas Supreme	20-May-2009 14:10        Hulumas About Contact  Quote this Post! Style: Flexible   Mood: Yells: "INVEST but not TRADE please!"
x 0   x 0  Alert Admin	I am sorry, you have given wrong calculation about profit by investor A. It should be Sgd. 3000 (due to selling at Sgd. 7 and buying at Sgd. 4 at the first round) and add another profit of Sgd. 2000 (due to selling at Sgd. 8 and buying at Sgd. 6 at the second round). So total is Sgd. 5000. Nevertheless, I prefer BUY-HOLD strategy rather than BUY-SELL-RECOVERY BUY-SELL strategy. The reason stastically the former chances making more profit is much much higher!!! jeremyow      ( Date: 20-May-2009 12:58) Posted: Just a hypothetical consideration:- If two persons A and B bought 1000 shares of a company at $4 at the same time. After that, the share price increases to $7. Person A sold off at $7 as he predicts the share price will drop short-term. Person B chooses to hold on as he believes the share price has room to increase further in future. He disregards any short-term movements in price as he thinks the share price has not been too over-valued yet. The share price really dropped after person A sold off his shares. He bought the same 1000 shares back at $6 as he thinks the shares will rebound again. Both persons continue to hold until their shares reached $8. Both person sold off at $8. Total Profits Person A made = $3000 (he made $1000 in first round of selling since he bought back the same shares plus $2000 subsequently) Total Profits Person B made = $4000 (he did not sell in-between and got the difference in share price as his profits) Discussion:- This is only a simplified hypothetical situation to the profitability of making short-term trades. The actual trading dynamics is much complicated as one needs to consider amount of shares and price to trade at (and any leverage to take). This hypothetical situation though not comprehensive in consideration, still provided a simple look at the profitability of making short term trades. It is not easy to do short-term trading and be more profitable than a simple buy-and-hold method. Most often, traders have to depend on luck to determine their profitability. In the situation above, person A would make more if the share price were to fluctuate more often and he has repeatedly bought and sold off a few more times at the right moments in-between. Traders can only follow trends and trade according to trends. They cannot control trends as the stock market is unpredictable. Thus, traders can potentially make more and also potentially make lesser than a simple buy-and-hold method. The buy-and-hold method is not as simple as it seems. The investor has to patiently wait for the right price to enter so that the price he enters has most profitable returns. In doing so, he will also invest very heavily at the price he thinks is most attractive and profitable. This attractive price is not based on his speculations, but on evaluating what a business is worth and investing at a large margin below what the business's share price is worth so that he captured as low as possible an undervalued price. Conclusion:- This leaves the investor to decide which strategy he is willing to adopt. A buy-and-hold patient and opportunistic investor or a high turn-over disciplined trader.
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cathylmg Elite	20-May-2009 13:07        cathylmg About Contact  Quote this Post!
x 0   x 0  Alert Admin	Simply put-----> TA vs FA But there is also another thing called 'market sentiment'. jeremyow      ( Date: 20-May-2009 12:58) Posted: Just a hypothetical consideration:- If two persons A and B bought 1000 shares of a company at $4 at the same time. After that, the share price increases to $7. Person A sold off at $7 as he predicts the share price will drop short-term. Person B chooses to hold on as he believes the share price has room to increase further in future. He disregards any short-term movements in price as he thinks the share price has not been too over-valued yet. The share price really dropped after person A sold off his shares. He bought the same 1000 shares back at $6 as he thinks the shares will rebound again. Both persons continue to hold until their shares reached $8. Both person sold off at $8. Total Profits Person A made = $3000 (he made $1000 in first round of selling since he bought back the same shares plus $2000 subsequently) Total Profits Person B made = $4000 (he did not sell in-between and got the difference in share price as his profits) Discussion:- This is only a simplified hypothetical situation to the profitability of making short-term trades. The actual trading dynamics is much complicated as one needs to consider amount of shares and price to trade at (and any leverage to take). This hypothetical situation though not comprehensive in consideration, still provided a simple look at the profitability of making short term trades. It is not easy to do short-term trading and be more profitable than a simple buy-and-hold method. Most often, traders have to depend on luck to determine their profitability. In the situation above, person A would make more if the share price were to fluctuate more often and he has repeatedly bought and sold off a few more times at the right moments in-between. Traders can only follow trends and trade according to trends. They cannot control trends as the stock market is unpredictable. Thus, traders can potentially make more and also potentially make lesser than a simple buy-and-hold method. The buy-and-hold method is not as simple as it seems. The investor has to patiently wait for the right price to enter so that the price he enters has most profitable returns. In doing so, he will also invest very heavily at the price he thinks is most attractive and profitable. This attractive price is not based on his speculations, but on evaluating what a business is worth and investing at a large margin below what the business's share price is worth so that he captured as low as possible an undervalued price. Conclusion:- This leaves the investor to decide which strategy he is willing to adopt. A buy-and-hold patient and opportunistic investor or a high turn-over disciplined trader.
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jeremyow Senior	20-May-2009 12:58        jeremyow About Contact  Quote this Post! Style: Flexible   Mood: Yells: "Passionate business investor"
x 0   x 0  Alert Admin	Just a hypothetical consideration:- If two persons A and B bought 1000 shares of a company at $4 at the same time. After that, the share price increases to $7. Person A sold off at $7 as he predicts the share price will drop short-term. Person B chooses to hold on as he believes the share price has room to increase further in future. He disregards any short-term movements in price as he thinks the share price has not been too over-valued yet. The share price really dropped after person A sold off his shares. He bought the same 1000 shares back at $6 as he thinks the shares will rebound again. Both persons continue to hold until their shares reached $8. Both person sold off at $8. Total Profits Person A made = $3000 (he made $1000 in first round of selling since he bought back the same shares plus $2000 subsequently) Total Profits Person B made = $4000 (he did not sell in-between and got the difference in share price as his profits) Discussion:- This is only a simplified hypothetical situation to the profitability of making short-term trades. The actual trading dynamics is much complicated as one needs to consider amount of shares and price to trade at (and any leverage to take). This hypothetical situation though not comprehensive in consideration, still provided a simple look at the profitability of making short term trades. It is not easy to do short-term trading and be more profitable than a simple buy-and-hold method. Most often, traders have to depend on luck to determine their profitability. In the situation above, person A would make more if the share price were to fluctuate more often and he has repeatedly bought and sold off a few more times at the right moments in-between. Traders can only follow trends and trade according to trends. They cannot control trends as the stock market is unpredictable. Thus, traders can potentially make more and also potentially make lesser than a simple buy-and-hold method. The buy-and-hold method is not as simple as it seems. The investor has to patiently wait for the right price to enter so that the price he enters has most profitable returns. In doing so, he will also invest very heavily at the price he thinks is most attractive and profitable. This attractive price is not based on his speculations, but on evaluating what a business is worth and investing at a large margin below what the business's share price is worth so that he captured as low as possible an undervalued price. Conclusion:- This leaves the investor to decide which strategy he is willing to adopt. A buy-and-hold patient and opportunistic investor or a high turn-over disciplined trader.
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