-2

I was thinking in ways to make money by trading stocks and one strategy I am considering to test is the following:

Every week select one stock based on some type of analysis and trade it daily, taking advantage of leverages offered for day trade. I would buy the stock early on the morning, next to the opening bell and I would sell it next to the closing bell. I do not want to invest time in constantly checking the performance of the asset during the day. I want to buy it in the morning and sell it next to close bell, for whatever price it is.

  1. Is there some good bibliography available to study approaches to maximize returns associated with that strategy?

  2. What are potential benefits and cons of that strategy?

notes regarding leverage and costs:

In the country I live brokers give you leverage for day trade. For example, if I have $3000 invested in bonds, I can buy like $10000 worth of stock in day trade without needing to withdrawal my $3000. My $3000 remains invested in bonds giving me return and I would either gain or lose the variation of the price of the $10000 worth of stock I had bought depending on the performance of the day

If buy and sell in a day trade, there is no interest. There is interest only if you hold the position until the other day or days. Each trade would cost 3$ to buy and 3$ to sell. My idea is buy $10000 worth of one stock in the beginning of the opening and sell it next to the closing bell. Suppose the stock varies +0.3%, I would make 30$ - 6$(trade cost)= 24$

  • 2
    I'm not sure exactly what your strategy is. You're going to mechanically buy the stock in the morning and sell it at close, regardless of what happens during the day? Isn't that the same as buying and holding except that you'd rack up a bunch of transaction costs? – Endy Aug 7 '18 at 1:16
  • No, in the country I live brokers give you leverage for day trade. For example, if I have $3000 invested in bonds, I can buy like $10000 worth of stock in day trade without needing to withdrawal my $3000. My $3000 remains invested in bonds giving me return and I would either gain or lose the variation of the price of the $10000 worth of stock I had bought depending on the performance of the day. – JuniorStack2 Aug 7 '18 at 1:38
  • We'd need to know more about the costs of the leverage and trading. How much interest does the broker charge? How much does each trade cost? – Brythan Aug 7 '18 at 2:41
  • 2
    And if it varied -2% you would lose $200 - $6 (trade cost) = -$206. There's no strategy here! – TripeHound Aug 7 '18 at 6:56
  • 1
    I don't like the downvote trend here. Yeah, the OP is incredibly naive about the subject of their question. But the question itself is decent. Better to have the naive question with good corrective answers than to simply have the question get deleted. – Kevin Aug 7 '18 at 16:24
5

with that strategy?

WHAT STRATEGY? A strategy is a fixed sell of rules. Your short lines are meaningless blabla about only trading one stock and buying in the morning and selling in the evening and - oh - choosing it "by some analysis". And then you ask us whether this will work. Here is a hint: It will work if by some magic your "by some analysis" actually identifies stocks that are more expensive in the evening than in the morning by enough of a statistical edge that you make money. The devil is in the detail and you seem to think that "one stock, fixed rules with some magic analysis" allows us to tell you whether this will work.

potential benefits and cons of that strategy?

Potential Benefit: You make money and can be lazy trading 2x per day when it is convenient for you.

Potential Con: You lose money.

Anything else needs two things.

  • A detailed description
  • A reference. Benefits compred to what?

Btw., is there are reason you ignore all the market and trade ONE stock per day? I mean, this is a gambler attitude - let's put it all on black.

Please do not approach trading, particularly day trading, with such naivity. Fools and their money will soon be parted. This is a highly competitive activity and if "some magic fairydust" would just come to everyone, everyone would be rich. Maybe YOU can make money (most people can not) by this, but it will require you to put in a lot more work than just writing something like you did without any substance, not making any testing and just- not sure, hoping? Start reading some books and learn how to evaluate a trading strategy, then realize you actually need one before... testing one.

Disclaimer: I own an IT business. Trading financial instruments is one of our registered business activities.

0

You're right in the meaningless part of your question: yes, that 'strategy' will make money.

But you completely glossed over the hard part of your question: how to pick that 'one' stock before each day?

Let me walk you through the 'analysis' you're talking about:

Phase 1 - You personally notice a trend. Event X usually leads Event Y; if you look out for Event X, you can predict Event Y - and if Event Y is a stock is going to go up in price within the day, you buy that stock. Simple!

Phase 2 - A computer programmer makes a program that uses the same logic you're using, and beats you to the punch every time. By the time you can purchase your stocks, the computer version of your approach has already done its job and bumped the stock price up before you can buy.

Which is okay, because:

Phase 3 - A better computer programmer makes a more sophisticated program that continuously looks at thousands of stock prices, and looks for interconnectedness between stock prices - so that it can find better (or more subtle) trends than a human would be able to spot. Better yet, it finds all the people in Phases 1 & 2 and preys on them.

Don't worry. Those 'better' computer programmers are losing money now, too, because:

Phase 4 - An even better computer programmer expands on Phase 3, incorporating all sorts of inputs that you wouldn't necessarily expect a stock program to use at first. Twitter feeds, trending hashtags, reddit, facebook, etc - any facet of available info that might have any sort of bearing on stock trends. And it uses the same analysis that a human can't do to determine trends that a human would never spot.

... etc.

Basically, Day-Trading is a huge, competitive, dog-eat-dog world where computer programs are trying to out-compete with one another to make "easy" money. So, the question is, are you a computer developer with a lot of both financial experience and AI/Machine-Learning experience? Because, otherwise, you're likely just going to get your lunch eaten by a computer.

Some reading if you're interested:

https://money.cnn.com/2018/02/06/investing/wall-street-computers-program-trading/index.html

https://www.forbes.com/sites/nealegodfrey/2017/07/16/day-trading-smart-or-stupid/ (particularly the part where it says 90% of day traders are losing money; and only 1% are making real money off it.)


For what it's worth: I was bored one week 15 years ago shortly after I graduated college, and programmed a bot in the Phase 3 area. I never went live with it - it only made pretend trades. I've always wondered what would've happened if I hadn't shelved it.

  • Well, my company has automated trading as part of the business activities and let me tell you - hard work, lots of hard work. And income to match. You nicely ignore the fact that 3a_ you still make moeny becaue not only ONE guy can make money. You just must be smart enough to be in the top 4 percent or so. – TomTom Aug 7 '18 at 16:52

Your Answer

By clicking “Post Your Answer”, you agree to our terms of service, privacy policy and cookie policy

Not the answer you're looking for? Browse other questions tagged or ask your own question.