5% per trade

[Ponda]

Hey all. just opening some discussion in regards to making 5% per trade on $5,000.
It is something that I have been thinking about and after a gentle 'light bulb' moment from a post on HC I thought that I'd give it a nudge with paper trading.

The below is just my 'ponderings' and in no way should be deemed advice. It is purely for discussion and thought.

I'll put that post up here. Thanks mudguts (hope you dont mind.) Change the 'days' to 'trades' and see how it goes.

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"Good point.. BTW would be more than a millionaire if you invested say $5,000 as you starting point.

Do the calculation on a 5% return per day, with income reinvested..it truly is staggering..

Doubled your money in 15 days
10 times your money in 49 days
100 times your money in 96 days
A millionaire by day 110
10 million by day 156
100 million by day 203

Now how do we find that 5% return per day..can't be that hard..surely

easier option..buy more PEN

M"

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OK, so following on from that post I started papertrading for the last couple of days and have done four trades. Those being. (apologises as I didn't include brokerage in my workings. But you can get the drift)
Trade 1.
Jan 31
Buy 180,000 GLFOB @ 2.3 cents = $4,140 Target price to sell 2.5
Sell 180,000 GLFOB @ 2.5 cents = $4,500

Trade 2.
Jan 31
Buy 49,450 SSNO @ 9.1 cents = $4,500 Target price to sell 9.6
Feb 1
Sell 49,450 SSNO @ 11 cents = $5,439 (I was lucky as it gapped up on open)

Trade 3
Buy 12,086 KDR @ 45 cents = $5,439 Target price to sell 47.5 cents
Sell 12,086 KDR @ 47.5 cents =$ 5,740

Trade 4
Buy 5,035 MHM @ $1.14 = $5,740 target price $1.20
This trade is still 'live'

So, in 3 days I have returned $1,600 at a rate of 38%. I accept that I haven't included the brokerage but the numbers, if including brokerage, would be at about 33.8%.

With the MHM trade I was seriously considering 'selling" out at $1.12 taking the loss and buying ESI

Now, there are truckloads of shares that you can do the trades with. For example finding a share and buying at 10 cents and then selling at 10.5 will give that 5% or buying say ESI at 2.1 cents and selling at 2.2 cents will give just under 5%. If you look at the trades today on ESI I think that that would be possible. When I was watching that one early in the day there were very few, ie maybe 40,000, to buy at 2.1 yet that got hit at the close and so tomorrow or the next day I am convinced that it will go to 2.2.

I have a number of companies that I am watching and they easily do 5% movement in a day. However, of those some I would not touch, i.e PEN because the depth to sell from 10.5 to 11 cents is to great for the trade to work, but, the PENOA's or OC's have less depth but are still governed by the heads and therefore subject to the 5% movement.

Anyways, those are my Wednesday night thoughts and would be keen to hear anyone elses views.

[shasta]

Ponda

Stocks over 10c move in 0.5 increments, so checking for anns before/after the exchange open/closes & checking the overnight markets might give you a heads up

If you pay for live data you also get a 20 minute window over those using delayed data, its not a long time, but if you can beat the herd you might be able to shake out some weak holders. I use stockness for free though.

Don't forget to include tax in your trading results either!

Also remember the market after a good overnight peformance on the DOW & European markets usually starts strong & drifts towards the close, as day traders exit there positions.

Best to buy late in arvo & sell first thing!

[minimoke]

Equally, I guess it could also be said that your trade could loose 5% a day. If the theoretical strategy didn't work, how long would it take a trader with a, say, 10% stop loss to be sent to the poor house.

[Ponda]

Equally, I guess it could also be said that your trade could loose 5% a day. If the theoretical strategy didn't work, how long would it take a trader with a, say, 10% stop loss to be sent to the poor house.

From my back of the envelope workings, I did place a 10% stop loss. When that stop loss is activated you end up three steps back from where you were.

If I was to do this I would start with $5K AUD. If the trades went against me I would carry on until I had $4k and then call it quits. That means that if my first two trades went pear shape I'd give it up. The first trade could end up costing me the full $5,000, how unlucky/unlikely would that be?

I do agree though Minimoke it is a risk (as is walking across the road) and the risk is losing $5,000 But if in 15 trades you have doubled your money you COULD eliminate the risk very quickly.


Shasta (I don't know how to put two quotes in one reply) I'm not sure if live information or following Ann would give you the edge on this one. It would just be a case of having say 10,15 companies that you know the movement of price and take the company that has the better depth for your needs and gives the ability to make the 5% at the time that the funds are available.
I feel that I know the price of ESI like the back of my hand. It is going to trade between 2.1 and 2.2. The 52 week high/low is 5.3/2.1. It might go to 2.0 unlikely but could, hence the 10% stop loss. I believe that there will be a 4.7% trade in ESI today (unless one of you buggars sabotage it LOL)

[trackers]

The main problem I see is that you either need your entire portfolio to go up 5% every day (unlikely) or you restrict yourself to buying just the one share and assuming that you're going to get it right every day (highly unlikely).

"1. Doubled your money in 15 days
2. 10 times your money in 49 days
3. 100 times your money in 96 days"

I'm somewhere between 2 and 3, but its taken a hell of a lot longer than those days... And it gets harder as capital rises (i.e say you start with $5k and get to $50k, are you going to chuck down $50k in a daytrade on a share you know very little about? The thought of it makes me shudder)


The other thing I'll say to help, is that you're relying on good liquidity to both buy and sell side (i.e you sit there as highest bidder, get hit.. .then sell as lowest seller for a 5% scalp). If you get a proper account through somewhere like Interactive Brokers you can setup say 10 orders for different stocks, and if one triggers the rest all get cancelled - Saves having your money tied up sitting on the bid somewhere where it may take days for you to get your order tripped

[Ponda]

Trackers, If you replace 'days' with 'trades' it makes more comfortable reading. I like the suggestion of Interactive Broker. It would, as you say, eliminate the need for waiting for your order to be filled. I'm not saying to put up 50k on a company that you don't know about but you would have some knowledge on those 10-15 companies that you are keeping an eye on.

If I may have some poetic licence here. Lets say that it is midday NZ time and I had cash available to buy something now. I would buy all 375,715 share available in the 'ask' for PENOA at 7.6 $28,544 dollars worth.

Why buy those??
PENOA has a strike price of 3 cents, as does the PENOC's. PEN shares are trading at 11 cents. LOGIC dictates that PENOA's should be 8 cents. PEN had an announcement yesterday increasing their U reserves, so I would expect PENOA to increase.

I have a 'stoploss' in at 6.8 and a 'sell' order is at 8 cents. Lets see what happens.

[minimoke]

Trackers, If you replace 'days' with 'trades' it makes more comfortable reading.

It may make for more comfortable reading - but it isn't very exciting.

If you want to make 5% on your trade you have to make roughly 6% to cover the buy/sell brokerage costs.

The trick then is to find the stocks that will quickly return 6% every time you trade.

If we look at your paper stocks
GLFOB is now down at 2c
SSNO down at 10.5
KDR down at 30.5
HMH down at 10.9 - so all down from you buy point.

Now we could say your skill and benefit of hindsight allowed you to buy low and sell high (except HMH). How would your scheme have worked if you had bought these stock yesterday?

[minimoke]

If I was to do this I would start with $5K AUD. If the trades went against me I would carry on until I had $4k and then call it quits.

The only obvious point I would make about this is that you were aiming to make 5% instead you lost 20%. This puts pressure on you to return 25% on your next trade to bring you to break even.

Its a kinda rhetorical question but why are you prepared to loose 20% when your stop loss is at 10%?

[Ponda]

Now we could say your skill and benefit of hindsight allowed you to buy low and sell high (except HMH). How would your scheme have worked if you had bought these stock yesterday?

I wouldn't have bought those shares yesterday. What I mean is, I didn't look and see what the depth looked like yesterday, but looking at it today I wouldn't buy any of them.

I said earlier in this post that ESI would be the one for today, but that has had no trades and it does go against my rules. i.e I want to buy at the ask to avoid the situation that trackers mentioned. So if I had to today it would have been the PENOA's. Even if I have to hold for a couple of days iyt doesn't affect the end result.

[Ponda]

The only obvious point I would make about this is that you were aiming to make 5% instead you lost 20%. This puts pressure on you to return 25% on your next trade to bring you to break even.

Its a kinda rhetorical question but why are you prepared to loose 20% when your stop loss is at 10%?

Sorry for the confussion. For me this is just an idea or concept which I am just teasing out in my mind and on Share Trader and am just paper rading at the moment. What I meant by that was IF I decided that I wanted to give it a decent nudge and use real money then I would put into place my own capital preservation system. We can see that I was lucky in my first three trades, I could just as easily gone the other way.
If my skills (or lack thereof) means that my first two trades are losses and it is eating into my capital, then maybe I shouldn't be doing it and stop trading like that and think where to from here. But that is not to say that if my first five were wins and my next two were losses, I'd stop as it hasn't really affected my initial capital.
For me a $1,000 would hurt, but it's not a great amount if the rewards potentially could be really life changing