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Welcome to the stock market Rapid Recap. It is October 22nd 2015. I'm Sasha Evdakov and today's lesson we'll be discussing how and when to increase your share quantity when trading stocks.
We've already talked about scaling in and scaling in as stocks moved higher and if you go to the website and just scroll for the last two or three weeks ago you can see this video right here that just talks about one of the lessons from the Greats about scaling in and buying stocks as they move up not down. Today's lesson will be talking about How to Scale your Share Size or Quantity when you're ready to move up.
I know sometimes it can be a little more intimidating if you're just getting started in the stock market but now you're starting to find some success so how and when do you start accelerating or pushing on the gas pedal to start increasing your shares size.
I know this can really be intimidating when you're getting started and you really don't know when to start picking up speed and that's just something that you have to deal with as part of growing pains as you start getting better as a trader or as you start getting better at trading in general.
In this video that's what really what we'll be covering and focusing on is just talking about share quantities and to show you that you really don't have to trade large to make a good income or to make a little bit of extra money. I don't know your situation I don't know what it is that you were trading investing in.
I don't know how much capital you have in your account but I do want to share with you today a little video that I am going to share with you the account of showing you that you don't have to trade large to make a good percentage return on your money and I just put on a trade two days ago.
I'll share with you my IRA trade that I put on just for the sake of making this video for the Rapid Recap to show you that you don't have to trade large to be able to make a few good percentage points in a few days on your money so before we get into that what I'd like to do is let you know that the book for Penny Stocks is out and if you're looking to practice more on stocks that are less than $10 to trade them to the upside to trade them to the downside so the penny stock book is out.
This is mostly a chart book so ninety five percent of the book is all charts and the charts are really there to share with you some insight about where to draw the trend lines. It's there to show you where to get into the stock, where to take some profits and really just some insights about penny stocks or stocks less than $10. Now the traditional Penny Stock terminology or definition is for stocks less than $5 it used to be for stocks that are under $1 but now they raised the definition to $5 due to inflation and other things but for the book we focus on stocks that are less than $10.
If you're interested in that book you can go ahead and go to the website in the book section and you can go ahead and get it on Amazon and again the charts are black and white but it’s still a huge learning benefit to those of you that are looking to practice and study and learn more about technical analysis and charts.
There's the other books as well if you want to get into those books there's more charting practices that you can do and many of the other books that we have are available on the digital format now on Kindle so you can also get those in digital formats and this book will be turning it into a digital format soon as well as this Redbook as well.
Few of them are already on digital format so we're just slowly converting them and transforming them to the other medium. Now as far as critical charts go after I record this Rapid Recap because it's actually afternoon time so after I record this Rapid Recap I will do some critical charges for everyone and you’ll get a handful of charts in the website so go ahead and check that later tonight or early tomorrow morning.
With that being said let's move onto the screen and I just want to share with you some insight about just starting a trade and just getting yourself going because increasing your share quantity and just getting the active trading down initially sometimes can be difficult. Let's just go to the Think or Swim platform and I'm going to share this platform with you because it's just one of the easier platforms to go with.
Here, what I have is the platform and what I'm going to do is pull up a magnifier so here is that magnifier here on the left side so that way you can just see the zoomed in version of my mouse. I just understand that sometimes it's a little difficult to read the numbers so let’s try and make things easier and more simplified for you guys.
In either case this is actually my retirement account and just one of the trades in the retirement accounts so I just wanted to share with you that you don't have to trade large to make a few extra dollars on your retirement account and this trade that we have up is actually a calendar spread on Netflix and you can see the current local date and time here actually it is in New York, 11:51 October 22nd.
You can see the time there moving, acting and behaving so in either case this is a calendar spread that slide with real money and I just want to share with you that you don't need a lot of shares to make some profits or to increase your standard of living or to just improve your life a little bit.
Now this trade we put on just a couple days ago just one or two days ago and if you don't know much about options this is typically the way I trade my retirement account just because it's little more stable and stability is better in these options trades.
The way it works is this green line is the expiration date if you don't know much about options and this white line overtime deteriorates because you have a multi leg spread you sell one of the current month and you purchase a protection in a later month and the one in the current month expires over time and that one expires quicker than the one in the later months so that's the basics of this trade.
Now, as time moves on so as I shift the time as you can see this white line will get closer to the green line and that's really what happens that's where you make money and capture profit so if we get 2 November 10th and the price stays exactly where it is I would be a hundred and five dollars in profit now unfortunately we aren't there yet so we'll go to today.
Here we are at sixteen dollars in profits of real money and today we made a dollar seventy from doing absolutely nothing and this stock can move all the way up to a hundred and two dollars right now and I would still be at breaking even and it can move up to or down to $91 here and I was still break even. So it can move along this curve and that's what it does in terms of shifting back and forth. Stock prices can't be in two places at once.
Now the beauty behind what I wanted to share with you in this example was that the amount of capital that was invested so my maximum loss if the stock let's say goes to $40 is three hundred and sixty four dollars and 96 cents. So three hundred and sixty-five dollars is what my potential losses on this trade.
Now right now you can see were up 15 to 16 dollars give or take sometimes we're up $17, sometimes we're at $13 so we’re isolating there in that region for this trade. Now the point here is that we put it on a couple days ago just two days ago and our data every single day we make $3.16.
As time moves on you can see this data continues to increase so it accelerates as we get further in time and that just continues to increase and accelerate with time as time moves forward so as long as we stay stable in my safe region things will look good for the future.
In this case on three hundred and sixty-five dollars in profit what I wanted to do is share with you the percentage because remember it's all about the percentages so if we take a calculator out and we do the calculations so let's just say a nice $15 and we divided by three hundred and sixty-five in profit we're looking at basically 4.01% on our trade or on our money four percent in two to three days so two days to make four percent is huge it's astronomical.
You can't really get those kind of percentages in the bank you can't get those pretty much anywhere else.
On this account or this trade this is a starting point so initially when you're first starting and even for me in my retirement accounts I start with something simple something like one contract or a handful of shares now it's going to depend on which stock you’re trading, how much here your account is and so on and how liquid it is.
Normally for a retirement account I will start with simply one contract and the reason I do that is because as things adjust or move then I want to make an adjustment or I want to be able to make changes to my position so what I can do is if this actually goes against me what I can do is add a second calendar and I can go ahead and add this one as an example and you can see how that changes my profit picture or my potential.
You may also notice that they'd increases because were adding another position on it so now we have $6.47 that we would be making every single day from exploration of our calendars or options whereas if we don't have that we only have $3.18 that we're making which is still perfectly fine. It’s perfectly fine to make $3.18 but to get the position going we started with simply just one and then if we add the next one if things don't go in our favor we can shift the graph this way. If we completely missed the boat and the stock continues to move lower let's just say we can go ahead and add a calendar in a different region.
Let's say we take it to the ninety level so we can put on a ninety contract right here and now its shifts our graphs so you can see that without it and with it so with one contract here starting out it gives me flexibility to move one way or the other but what I can do is actually bump it up to two contracts or three contracts next because that first contract allows me a little bit of cushion so now we start creating an even bigger picture now we're making $10 per day and as that stock if it heads lower and we make that adjustment we're at $12 per day and with more contracts you're making 17, 18, and 20 dollars per day.
Here at two hundred and five dollars if the stock stays stable for just a week and a half, two hundred and five dollars at a max risk here of let's say 1400 so taking out our calculator let’s just say these numbers won't be exactly perfect but let's just say I had a 1400 you're looking at 14.2% in terms of profits in about a week or two which is astronomical it's phenomenal when you're talking about returns of investments and this just takes time to get there.
The reason I wanted to explain this with options is because options are little more complicated and because it's more complicated I wanted to explain it with this so you just saw things with a clear mind because if I explained this with simply a just stocks and getting in and out of stocks dynamically or getting in and out of stocks with one share or five shares you might think it's too little you might think that the return of investment is minimal and that you can't make a living trading just ten shares of Tesla or ten shares of whatever kind of stock.
The point here what I'm trying to make is that if you break things down into their simplistic forms look at the bigger picture look at the percentage and look at what's possible as you start scaling and leveraging things up you build things slowly and you continue to evolve and make dynamic trades but for many people what they want to do is jump in with let's say five or ten contracts or a thousand or 10,000 shares and they can't do it they can't keep up and that's where they fail.
That was really my whole point of sharing this example with you and again like I said this is real money current local date and time it's exactly noon you can see the time we’re still going and we're recording. So I wanted to just share with you this insight of the chart of the trade of what you can do with just three hundred and sixty dollars of an investment.
Now granted it takes time to learn to get there it's going to take your time and energy to learn how to make these kinds of trades. Now if you're studying stocks and trading them to the long side or to the short side that is the better approach.
That is the more simplistic approach to get yourself started because it is a lot easier to do these kinds of trades for the long term for the stock market for swing trades, for short trades than is to do option contracts but again my whole purpose behind sharing that option trade with you was just to show you that starting small there's nothing wrong with that.
Now as far as getting into other trades getting into deeper trades like this and increasing your size increasing your position increasing your scale what you want to do is find your consistent pace you want to make sure that you're seeing things and you're able to trade consistently first such as a hundred shares or a ten shares or five shares or three shares if you're just getting started and stop worrying about the Commission's learn to trade those shares correctly first based on the charts.
If we're looking at Netflix and let's say I'm waiting for a break let's I’m waiting for that stock to break lower I may go ahead and you enter that trade here with just three shares. Of course it's going to cost me a few Commission dollars, might cost me five or ten dollars in commissions between doing both the trades but if I execute the trade right and then I go ahead and take profits of one share somewhere you know over here and I was patient enough to hold it then that would go ahead and tell you that you’re trading properly.
Most people worry about you know they say “hey well I didn't make a lot of money on this trade I didn't make a ton of cash because I didn’t trade as big or large”. What happens is let's just say let's just say that they went into a stock right here and they executed it perfect the trade was right you had the right pattern meaning that you had the right consolidation pattern right here.
Let's just say that everything right there let's just say everything right here was perfect and you got into that trade right here on this arrow right here and everything looked good everything was perfect and then you got out right here and then the stock started the sell-off and you said “Uhh, I didn't make any money. I didn't really trade right” when in fact you traded perfectly you traded perfectly because the stock topped out the stock got high you had a little pattern here you got in at the right time at the pattern.
You got out you took your profits, you took your money off the table, you reduce your risk and the stock later was acting weak so you sold it. There's absolutely nothing wrong with a trade like that even though it didn't go very high or it didn't explode to the upside seventy or eighty or a hundred points it just simply was a smaller trade but everything that you did was correct so as you start moving into trades you have to start looking and understanding that your actions are correct rather than looking at a stock and saying “Hey well the stock didn't go as high as I wanted it to”.
The thing is you'll never get a stock to go as far as you wanted to they pull back they consolidate they retrace, power higher they hop around. All you can control is your money, you can control your money, your stops, your entries, your exits so you can control those things but you can't control exactly how high that stock is going to go or how low it's going to go that's the operators they control those things more less more so.
When you're scaling when you are getting larger share quantities over time and you're looking to see should I increase my share count start looking at how consistent are you. How consistent are you in choosing your trades in choosing your stocks.
Such as the McDonalds trade that we talked about a while back right over here so we talked about this one it was in the critical charts and then we talked about it popping potentially higher right here and then when earnings came out it powered higher. It dipped down to this level and if you were watching it you could have bought it a little bit on the dip right here and you'd already be up two dollars now.
Of course I would have gotten out of my position earlier before earnings and then you know you see these bars coming so even if you got in right here you'd still be up about thirty forty cents right now.
This gap is something to be mindful of but are you doing the right things that something you'd have to evaluate yourself and if you're doing things the right way time and time again and you're seeing the patterns you're seeing the trend lines you're seeing how stocks moving behave and you're able to do the right things you’re able to take profits, you're doing things systematically then by all means go ahead and slowly increase your share count.
If you were trading three or five shares that was just real money practice trading then you can go ahead and do let's say twenty or fifty shares you do that for a couple months to 3 months if you're still consistent then you can go ahead and go to a hundred shares or 200 shares. If you're not then you stay where you are or go back down.
It's a building block and you can continue to increase things and if you see the market's acting weak acting choppy if things just don't look great but you're still training consistently you can still just throttle back and trade a little bit lighter. If the markets not behaving the way you need it to why trade large but when the stars aligned when everything looks good when there's dancing angels in the street, if everything is lined up perfectly in bull markets typically you can close your eyes throw a dart and all the stocks will go up or the stock that you hit the dart with will go up.
Now in this case we don't really have a full bull market instead we just have a market with stock picks that tend to do fairly well or break out.
Here's one that's breaking out today and one that we entered here in the morning so this is Pepsi Co and Pepsi Co you can see here is the trend line right here the earnings were around this area right over here just a couple weeks ago i think it’s October 6th they had earnings. Here's our resistance line if you look on the daily you can see there's the line break it was hitting it there perfectly and if you go into the intraday and you zoom out there was your trend line right there so even if you got in it a little bit late let's say over here.
Here is kind of the stock heading higher boom for the day. Looking at these things and spotting them accordingly you might go ahead and trade you might trade lightly at the beginning and then you might add to that position if it continues another hundred or two hundred shares or 500 shares because it only cost you an extra five or ten dollars to make that trade but the five or $10 the risk if that stock was sold off, if that stock would have moved lower and continued to move lower now you could have gotten down you know two or three dollars and a hundred shares at $3 you know that’s $300 loss rather than paying your commission of $5 or $10.
Think about that for a minute so those are the two stocks as we go through it right now we got MCD there's the weekly we also talked about Pepsi Co and let me just go ahead and continuous with some of these stocks that we have on the list that I wanted to share with you.
Of course I will share more stocks with you in the critical charts just the little more detail but for this video my main goal was to share with you the lesson that you don't have to trade large to make a good return on your capital, to make a good percentage of return.
You simply just have to learn how to properly trade and then build yourself up step-by-step.
Let’s take a look at some of the other stocks CMG talked about the resistance line up here that stock broke lower right here we are talking about this one as well in the critical charts. Broke it tried to pop higher little bit to fill that gap but again it's showing weakness when stocks break from these high from the highs with the high accelerated volume and wide price spread that's troublesome so always be mindful and then step aside and get out alright.
Next one Solar City another one we had in the critical charts we had this one actually over here in August on the critical charts. It’s been isolating here but it's still showing some weakness today it's up 88 cents but really it's breaking that critical lines so again showing some weakness keep in mind the earnings.
AXP also with the earnings selling off majorly today there was the first initial line which you can see the pattern back here and then also we had the next support line and if this breaks this because you know we have the moving average right here where the stock is breaking look at moving average how that moving average was used in part as a support area so this moving average was really that support area and now that one time it hit it, second time hit it and a couple times right there bounced off of it and now it actually is breaking it.
If we break right here if we break this line because we have these areas right here in this stock as well if we break this line we could see some serious trouble in the stock because we are picking up some volume and you can just see that major sell off with a huge gap so be mindful be careful or be prepared to short that one.
The Down Jones still we're popping heavily in high today as you can see it is popping higher so my analysis, what is my analysis what do we think about the market well I talked about it that this was the line, I was watching the line in the sand and we are breaking it.
Are we breaking it on heavy volume? well at the end of the day we’ll tell you if we were breaking on very high volume you’d already see probably about eight million or so shares but it is picking up so it does look good but unfortunately we’re still toppy and still at the highs of the market right here so even if it comes up here we could have some resistance in that area and level which would mean that we can do a couple different things.
We can go ahead and break higher here and we can attempt to go high here and it can reject. The other option is we can go here and then we can move sideways here in this region and go sideways and then we can also go here play around a little bit and then try and break through here.
Now if we break through here I wouldn't really like the market I would be more on the shorting side because it's too fast too quick that the market would be too fast too quick it takes time to digest moves or the other option is we could just go up here move sideways roll back over and that could also turn out to be one of the situation so just be mindful of how things are moving acting and behaving.
Look at how things are going into the resistance, it’s lines going into the support lines and is there really fuel, is their substance to continue the move always things to keep in mind.
Hope you found this video helpful insightful maybe a little motivational to show you that you don't need to trade large to make a good return on your money and just wanted to share with you those little tips and insights and words of wisdom if you're interested in the stock market book remember just go to the Tradersfly.com website and you can go to the book section and then we have that Penny Stock Book available you’re welcome to go ahead get it just to get more practice.
As far as what's coming up next week we may or may not have a Rapid Recap and that's just because I have some business things and personal things that I need to take care of throughout that day so it'll be extremely busy for me so I'll see if I can take care of it but it's not we’ll definitely try to resume next week after that.
Now that we have the Penny Stock Book Wrapped up I do have one or two little business trainings that I need to fulfill and complete here before the end of the year but all in all the rest of the focus is spent on creating the massive Option Trading Course so it’ll be my plan and my focus.
Hope that you can join me on the next stock market Rapid Recap that we have.
Thanks again and I’ll see you next time.