AAAGH 18 +0 AB 41 -9 AUNT 56 +0 BOX 12 +3 CAR 15 +3 CC 82 -1 COMP 31 -7 DOG 6 -2 DARE 11 +3 EXIT 78 +12 FIST 29 +7 FNWS 18 -1 FRNI 39 +2 JAZZ 44 +2 KEV 30 -7 LOLO 78 +0 MRH 39 +0 NEO 9 +2 NICK 16 -1 PG 164 -18 RUSS 10 +4 SBA 60 +0 SNACK 34 +0 SNAP 58 -12 TNT 23 +4 VTNT 6 -7 WIN 509 +0 ZAP 13 +1 ZZZZZ 6 -2

Featured Article Archive!

September 2nd 2008

From Day to Day as a Daytrader

Many people have asked the question: What is Daytrading?

Put simply, it is Day Trading. Too simple?
Daytrading is the buying and selling of a stock on a daily basis. Or maybe 2 days. Or maybe 3. The point is, it is the act of buying the stock and selling it as quickly as possible for as much profit as you can get.

Now there is an extremely common misconception among non-daytraders. Many people seem to believe that a stock has to be at a high price for one to daytrade it. The truth of the matter is, I could buy a stock at 15 and sell it at 17 later in the day and it would be called daytrading. There would be exactly the same amount of risk if you had bought it at 15 and held it to 60.

So we know daytrading doesn't have to be risky. So why do some people still buy high? The real reason is because we want it to be like that. No pain, no gain. The riskier it gets, the better the payoffs if you do it right.
Here's how I got there.

Typically a stock will move anywhere from -20% to +20% in a single day. This rise is usually capped at about 50 points for the very high stocks. In a bit, you will see why I use the percentages.

An extremely important figure we must note in our daytrading is the 1000 stocks per day limit that we have placed on us. This not only limits the amount of money we can spend, but also the amount of money we can make.

Scenario time.

There are 2 stocks. One is at 15, and one is at 100. Let us assume that we can buy up to 2000 stocks per day. We buy 1000 shares of stock A at 15 and 1000 shares of stock B at 100. Both of them rise by 15%, after which we sell.

Stock A costs 15,000NP. A 15% profit (+2 points) would give us 2000NP pure profit.

Stock B costs 100,000NP. A 15% profit (+15 points) would give us 15000NP pure profit.

So as you can see, the number of raw points the stock moves up affects our profit. Stocks at a higher price tend to move more points in one day than stocks at a lower price. But imagine for a minute that you could buy as many stocks in a day as you would like. If you had bought 10,000 shares of A instead, that would give you a profit of 20,000NP. That would give us more profit than stock B for much less risk. But alas, there is a 1000 a day limit, forcing us to stick with stock B to make the most profit.

But you're probably like "So.....umm.....you would do all of that – go through all of that drama – to make 15k? I could make that in 30 minutes, no risk involved and no calculations by playing games. Even better, I could restock a few items to make that easy. Where is the real money at?? What is all the fuss about daytrading really about???"

You haven't seen anything yet.

At 7:00am on the morning of April 13th 2007 POWR peaked at a whopping 861NP per share. At that point, in the space of 24 hours it could move as much as 50-60 points per day. That was the equivalent of 60k a day.

Not bad for a day's work, eh? But that was on a good day. But you had to be willing to cough up 800,000NP+ to be held in escrow.

But can't we make more than that by selling at 60+? Not really. Nothing in the stock market beats 60k a day. But you must ask the question. Why do we play the Stock Market? Why don't we restock, or play games?

For a single person it may be different. But I am sure that I speak for many when I say that it is because I can double or triple my investment with very little effort. Yes the stock market is slow, but it is also a blessing. Because of this snail's pace we can check up on our stocks as little as once a day. Daytrading removes this luxury – we have to constantly check our stocks.

In addition, with the randomness of stocks we can pick any stock to buy on mere whim, not even taking us a minute a day. With daytrading we must put more effort into getting the right stock.

So now you know that the 15-30 or 15-60 methods are alot easier than daytrading. But what if we wanted a faster profit? I need money. And ASAP too!! There is an option that you have.

No, it is not daytrading.

Or anything to do with the stock market as a matter of fact.

Ever heard of restocking?

Let me tell you why restocking is a better option.

Daytrading
I buy a stock. Check back every 30 minutes for the next (??) hours until it goes up. Sell for a minimal profit.

Restocking
Buy the goods in a store. Put it in your shop. Snap your fingers, say "Alakazam". Profit. Skadoosh.

Daytrading
Ever heard of a stock crash? "Every stock that has risen so far has fallen eventually. That is, except for POWR." Will it fall eventually? Yeah, it will. But we don't know when. But when it does...prepare to wait. Because you'll be waiting. Very long.

Restocking
Do I have to repeat myself? Buy the goods in a store. Put it in your shop. Snap your fingers, say "Alakazam". Profit. Skadoosh. One shot. No holding. No regrets. Instant profit. Item prices can't crash in what was it......30 seconds?

So I believe I have made my opinions very clear. I would like to highlight here two methods that are attractive money making ventures.
One is the stock market. 15-30 and 15-60 methods are very effective. Refer here to learn. Number two is restocking your shop. This is if you can't wait. Refer here for a guide.
I hope you note that daytrading is not listed here. It is not an attractive money making venture. Daytrading is for fun – a game of luck and chance, but nothing more. Other games you may be interested in are the Wheel of Excitement and Dice A Roo.
Young investors, please stay away. Leave it to the experts.





August 23rd 2008

Hyperstocking – Beware of Bankruptcy?

Make sure to diversify!! If a stock goes bankrupt, you're sure to cut your losses that way.

Is this really true? The answer is yes....and no.

Why do we diversify? Or more importantly, what is diversification?
Diversification is a term that you will encounter many times over in the stock market. It is the investment in a wide variety of companies, as opposed to investing in a select few as in hyperstocking.
Here is an example.

Portfolio 1 contains 100,000 shares of stock A and 50,000 shares of stock B.

Portfolio 2 contains 10,000 shares of 15 different stocks.

Obviously Portfolio 2 is the more diverse portfolio, since it has 15 different companies. Although both have 150,000 shares, they are almost opposite.

So now the question comes up. What is the advantage of a diversified stock?
As said before, a stock can go bankrupt and fall to 0. When this happens, the share price never rises again and you are prompted to "Dump this stock". If this happens, all hope is lost.
Imagine Portfolio 1 when his 100,000 shares of Stock A fall to 0. He has lost a great majority of his portfolio and has to rebuild almost from scratch. He has lost over 1.5 million NP in invested money and much more in potential returns.
Take a look at Portfolio 2 now. It only has 10,000 shares of stock A. The losses are much less (approx. 150,000NP) and there still are many other stocks to recover his losses with.

But we soon hit a snag. A stock has not gone bankrupt in over 2 years. It is widely believed that TNT will not bankrupt another company for fear of loss of fan base. After all, these people are paying them money to have a good time. If stocks crash people would be disillusioned and, like magic, their income drops. So the possibility and risk of a bankruptcy is a thing of the past.
In addition, there is a common misconception that all hyperstockers only invest in a one or two stocks. This is not really true, as there may be some days where buying the stock is not possible. I would consider a diversified stock portfolio as having over 10 different stocks. Anything less can be called hyperstocking, or in other words, if any stock in your portfolio accounts for over 10% of your entire totals, you have hyperstocked it.


Is it now okay to be person 1?

Let us look at the facts to find out.

A stock can take as little as a month to rise, or it could take more than a few years. To effectively give an example, we must use two scenarios.

In scenario 1, the stock hits 100 in a little over 3 months. That should give the person enough time to build up a decent portfolio. When this stock peaks, he will have a small fortune. Nicely done. You are a lucky one.

In scenario 2, the stock does not peak in over 12 months. Every day that the stock is buyable, the person buys a stock. I estimate this to be about 150 days per year. So by the time the stock peaks, you would have had over 200,000 stocks at a cost of over 3 million NP.
Now the stock has not peaked yet, and you are still waiting. When do you stop investing and move on? How long can I sustain this buying before I go bankrupt? How much is really enough? These are questions you must ask yourself before you start hyperstocking.

Now there is the other side of the story.

In an average month there may be 2-3 stocks peaking at 60. If your sell point is at 60, I estimate that you would have somewhere between 5,000 and 20,000 shares per stock on average. Using those figures, you should be making atleast 500,000NP in sales per month if you have 1-2 of the stocks that peak. This should allow you to buy 30 days worth of stocks again, and thus you have a self supporting portfolio.

Now for some logic. Here's how complicated it is:

If I have 100,000 shares of stock A and I sell them at 60, I make 6 million NP in sales.
If I have 100,000 shares of stocks A through J (10 different stocks) and I sell all of them at 60, I make 6 million NP in sales.

Is it really that hard?

But what is the difference?

In scenario 1
I have a nice portfolio. Big. Classy. People always are amazed at my portfolio. If I decide to sell, I get a nice huge payout in one big lump sum. 6 million in one go. There is the possibility of waiting a few months for this, and there is the possibility of waiting years.

In scenario 2 I have similar totals to Portfolio 1, but my stocks are spread out over 10 different companies. That means that not all my companies will peak at the same time. I will get a steady income each month on average. It isn't as eye catching as Portfolio 1, but it gets me money and returns. I have achieved the self supporting portfolio.

So now for the bottom line.

Hyperstocking is great. You would get the same payout as you would if you had a normal, diversified portfolio. When it does peak, you get a nice big payout and your income spikes. However you must start over in rebuilding your portfolio.
I would, however, advise that if you are a young investor, you stay away from hyperstocking. Unless you have 10 million NP + hidden away somewhere, it is not worth your while. Like said earlier, this type of stocking can tie up millions of NPs for years. That is, if you choose the wrong stock.
An example of the wrong stock was EEEEE. A year ago, EEEEE was the best stock around. Many people would stock up when it fell so that they could catch the next peak. Sadly, it never came. Their hard earned money still lies here today. Rest in Peace.