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I would like to share with you very interesting daytrading strategy that I use in this year. This method helps me make 10% pure income (after deduction of brokerage fees and taxes). I think I could get a better score, but I was wrong twice, so I had to sell the shares and my income was down. Everyone learns by their mistakes, so I do not regret anything. After taking losses I could notice that every derogation from the rules of 1 percent strategy, resulted in losses. Let’s get started 🙂
NOTE! Investing in the stock market involves risk – a method eliminates the risk because it allows you to make good decisions at the right time, but … if you do not have experience on the stock market I encourage yo to create of a demo account and test the “rules of the game”. Since I am from Poland I trade at Warsaw Stock Exchange (GPW), but I know that this strategy works in every stock market in the world.
Before we begin the adventure with stock market we perfectly need to know the rules. We must also closely monitor the company of the industries we know best. Personally, I recommend to focus on blue chips, because they are in fact the most liquid (easily buying and selling the shares), and less risky.
What is the strategy of 1%?
This is a daytrading method type (purchase and sale of shares on the same day). This does not mean that we need to invest and bear the risk every day. Personally, I advise against investing all the time. Better to wait and see how the market situation is defined. When we are confident the upward trend on the shares – we can start our job. The method is not for everyone – it requires continuous observation and a large cash contribution at the beginning (I recommend to use bigger cash – because 1% from larger sum equals bigger profit)
The method is based on observing companies and purchase of shares in the most opportune moment. This moment is usually decline in value of shares. These may be other situations – eg. The reduction in speculative assets, upcoming results, concerns about the situation of global economy, changes in raw materials, etc. But before we fall into the vortex of shopping – we have to see why the shares are falling down, how company’s stock prive behaves in the past ( check historical data from before 0.5 years or 1 year). We must of course know the economic situation and the macroeconomic environment and micro companies. We also need to check the current information about the company (reports etc.). When we meet these conditions – we buy shares. When the stock price rises to allowing us to earn exactly 1% (pure income, so the percentage should be about 1,25% – depending on the tax and brokerage fees) – then we sell the shares. In practice, we set the option to sell shares at the purchase price plus the value of giving us a 1% gain. We read this value by calculation. Do not forget to set stop-losses, because we can never be sure whether our decision was the right decision. We can just use my profits calculator from the stock exchange.
But before you start, you should answer some questions:
- Is trading for you use to be the main source of income?
- How much time you can devote to trading?
- What capital you are planning to spend on trading?
- Do you characterized by quick action, or rather a long thought process before making a decision?
These few questions are the basis for the choice of what kind of strategy can be good for you.
- At the beginning we choose the best brokerage account that has low fees or have a good platform sales.
- We choose companies that we know best (observe them for a long time and watch their reports)
- We select undervalued companies and / or those who recently lost value.
- We invest in stable companies, which in the future are able to make up for losses.
- Are desirable company paying the dividend – due to the limitation of risk.
- Do not diversify (invest in 1, max. 2 company at a time)!
- The larger the capital invested, including 1% gain puts more money.
- Before buying carefully review the reasons for decline in value of the shares. Using the calculator, we check to see if the share price must rise to make a clear 1%.
- We do not hurry – tomorrow is another day 🙂 Rushing in the stock market is not a good idea.
What do we need?
- Some free time – at least an hour a day to check, how’s the company condition. The best method is to constantly watch business channels. If you do not have such an opportunity – necessarily we need to read the comments, watch the exchange and information pages.
- A good calculation program / system. Calculating the real profit is not difficult and anyone can do this calculator to create. To facilitate the work I prepared a calculator. Profit Calculator is quite simple to use and operate its founding in every country and in every market exchange.
- Courage, moderation and preserve Cold Blood.
- The consequences in action. Do not forget about to sale the shares at the time we earn 1%. This is crutial. Every time when I wanted to bend this method – we can suffer losses. In this method, as the safest in terms of the accumulation of capital. However, daytradingu method is quite risky so we have to be aware that we may incur losses.
Experience the stock market is the most important. In addition, it is good to have a little bit of luck, (but don’t count for this). Through observation and experience are able to make a good decision.
Let us assume that we have 10 000 PLN (unit is not important right now. I set currency of Poland as an example). It may seem like a lot of money but investments listed by daytradingu should be accompanied by a greater amount.
As an example, we take the KGHM stock from WSE. Suppose now that the share price is PLN 100. We also need to know our broker brokerage commission. It varies in the range of 0.019% – 0.038%. At first glance it seems a little. But – as we soon shall see – it is a substantial portion of our profits.
Let’s use the calculator stock exchange, which I use.
For a total of 10,000 you can buy 99 shares (10000 * 99 = 9,900. The commission 0.038% = 37.62 PLN. In total, we pay 9,937.62 PLN). To earn a pure 1%, KGHM must be increased to 102%. In this case, we will earn 98.82 PLN (9,937.62 – 100,059.63 (including commission 38,37 PLN) – 122 PLN – 19% VAT = 98.82 PLN. As we can see, to make a purely a 1% share price must increase by 2%. This way you can see that HALF the profit earned goes to the brokerage and tax beam. Unfortunately we can not do anything about it. The only possibility is to find the cheapest brokerage and investing only in it.
I hope you liked the method 1%. I encourage you to try it if we have more capital. This method can be a great source of income. For larger amounts, and good handling cash, we can completely abandon the work. However, I would not recommend doing this, because the stock market is a sine wave – can be boom, bull market or zero trend. Keep in mind that the stick has two ends. While there may be a risk of loss of profits. Let us also remember that the loss of 1% is much deeper loss of capital because with every purchase and sale of shares brokers charge commissions on our trading operations. Therefore, the loss of capital by 1% causes a loss of 3% (depending on the amount of commission). When we do not pay tax loss (in Poland 19%).
What is your opinion about this method? Perhaps you know better investment strategies? Share with me via the comment below.