Hey folks, welcome to CCB. In today’s post I’ll share my thoughts on pros and cons of trading the same stock everyday.
The biggest advantage of trading the same stock everyday is, you’d be knowing its fundamentals and behaviour. When you pick a stock for day trading there are plenty of boxes the stock should tick. Out of the boxes some fall under the category of fundamentals. Along with this when you trade the same stock everyday you’d be knowing the major events taking place within the company, the events can be general meeting, earnings report, issue of bonus shares, dividend alert etc. Basically you’d know how the pulse of the stock behaves under certain conditions. So you’d be in a position to outperform newbies while trading the stock.
The con of trading the same stock everyday is, when the trend of the stock is sideways the magnitude of profit would be small. Imagine a stock having daily range of at least 1%. When the same stock is consolidating or moving sideways the daily range may drop to 0.5%. So on such occasions the profit may not be jaw dropping.
If you look at Moneycontrol app you may find that everyday there are stocks hitting upper circuit and moving over 10% per day. But the problem is not everyone would take benefits of it. Large fund houses would have many employees tracking different stocks, so they are in a better position to take benefits from large movements provided they have such stocks under their radar. Earlier I said 10% right, so calculate how many days it takes to double your capital. Very few days right ? Yet nobody does that, and the reason is nobody wants to bet on new stocks everyday especially when they haven’t caught the pulse of such stocks.
Is there a solution to the aforementioned problem ? And the answer is yes. The thing is, a stock cannot go up everyday, when it does go up for few days, at a certain point people tend to book profits. Profit booking is like a chain reaction. When big players book their profits there is selling pressure, and as this causes drop in stock price, even other investors end up selling as they don’t want to lose more. So this offers a good shorting opportunity. If one confirms the opportunity with technical indicators and other essential data. Then she / he can short the stock with a stop loss. This is risky since you don’t trade that particular stock everyday but if you are ready for taking a stop loss too then it is a lucrative shot. As of now there isn’t any software that catches the pulse of the stock, if one exists then the aforementioned process would have been easier. You can verify this paragraph by looking at the past charts of stocks.
Another way to make money is by shorting stocks that you have in your holding. Stock traders tend to invest in some long term stocks too. So when there is bad news during a particular quarter you can sell that stock and buy back the same within a day, the difference would be your profit. An example of this is Tata Motors, recently there was a bad news and the stock collapsed 10% within a day, so shorters made some good money. Since the stock poses to improve in the future one may not sell the stock just because of bad earnings in one quarter. He or she may still have it under their long term position. So doing the aforementioned can be an option.
Well folks, that was it for this post. See you next time with a different one. If you found this post useful consider sharing it. Also check out other posts on this website that may interest you. Byeee 🙂
Disclaimer : Trading stocks is subjected to market risks. Please read all the terms and conditions before investing. The motive of this lesson was to teach little things about stocks for those who do not understand much about stocks. Candidcanblog.com will not hold any responsibility for any losses incurred to the readers of this post.
© 2021 Candidcanblog.com