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Are these Rolling Stocks meant for Day Trading?
No, they are not meant only for day trading. Some do tend to work out quite well for that, though. I can't do Day Trading, myself. I'm still not at a point where I can give up my "day job" and just follow my passion of trading stocks. Plus, their is that small part, about my not being proficient enough to make a living at day trading yet, thus, probably causing myself to go broke if I were to attempt it at this time.
Since I've gotten carried away in this letter anyway, I might as well conclude with a final thought on trading. After having invested a great deal of time in researching stocks and the science/art of trading. This is the direction that my short-term conclusion is headed in:
First there is absolutely no doubt in my mind that an enormous amount of money can be made by an individual in the stock market. There are also a great many ways to do it. I believe that the well thought out, long term investments are the most important. Look at the blue chip stocks and do some reading. Anyone of at least normal intelligence can figure out the better industries and companies to put their money into, quite easily. For me though, I simply enjoy the process of making additional money, through a little trading specialty called "Rolling Stocks."
This morning was a good example of how I like to operate. I brought up three stocks to monitor from the rolling stocks list. They were each between .30 and .50 a share (I use the Medved QuoteTracker for this, but keep an open avenue to the E*Trade, trade execution web page at the same time.) Because I didn't have much loose cash available today, I thought that this would be fun. I've been watching the daily characteristics of these stocks for sometime now. It's common for at least one of the three to be floating freely up and down, between .28 and .38, at least once or twice within one trading day.
Now the spread on each is only .03, so taking that important fact into consideration, I made my plan. Starting with some math, I calculated that if I own 4,000 shares of any stock, that their would only have to be an increase of .01 from what I paid to what I sell it for, in order for me to break even (that's because the commissions total $40.00, to buy and sell a stock; .01 X 4,000 = $40.00.) Every .01 above that, I profit by $40. Now, if the price is at .28 and the spread is .03, that tells me that I'll have to pay .31 (Ask Price.)
Further, I know that for me to at least break even when I sell, that the stock's Bid Price will have to be at least .01 higher than the Ask Price was when I bought. So, if I paid .31, when the stock was at .28, then the stock will have to be at .35 in order for me to sell at .32. Considering that the price is expected to go to at least .38, at which time I'll be selling for .35, I'll make a profit of $120.00, .35 - .32 = .03, and .03 X 4,000 = $120.00.
The stock is GSMI; it hit .28 at 0920, for the buy. Then at 1120, it hit .38, for the sell. Don't mess around with this, unless you have personally watched it work, have traded it on paper, and that you are very confident that the stock will move in your predicted pattern. Don't forget that the complete opposite can just as easily occur! If the price doesn't go high enough before the market closes, it probably will in the next day or two. Keep on the look out for little jewels like this one, there're aren’t many of them this cheap, that you can do this with.
The same theory works on larger stocks too. Again simple math prevails;
Remember that the listed price has to increase in price by .01 + the amount of the spread. If the spread is .20, then .01 + .20 = .21; with a .57 spread the price will have to increase at least .58; and so on. Of course the smaller the spread the better it works.
4,000 shares X .01 = $40.00; then, .01 (or however many cents you want to use) + the spread
1,000 " " X .04 = $40.00
100 " " X .40 = $40.00
Basically, just figure out how much money you’re a going to use. Then find a dependable stock with the right consistent, repeating price fluctuations for that money. For the money, the larger the price per share, the less shares purchased. The greater the spread, the further the price has to move before it generates any profit, same as when you purchase smaller amounts of shares.
If you feel the perfect stock price for you would be, for example; $6.50, but you don't know of any good stocks at that price. Go to an on line stock screener, such as WSRN.com and plug in a price range of something like $6.00 to $7.00, now just check out what turns up.
The above are just ideas to use as you please. Just be careful and as always, do your own research and run everything on paper for a while, before actually sinking any money into it. Penny Stocks are very, very risky! The best advice that I can give is, to do your trading with the higher priced stocks. There is far better chance of them going up in price than there is with the risky little Penny stocks. You won't be able to buy as much at one time, but the odds are that the price will move a within a greater range, to help compensate for this. The idea and the math are the same regardless of the price of the stock. Only the numbers used in the math and the amount of risk in the plan will vary.
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