Crypto or Stock Trading: How I minimize my risk and succeed
In stock trading, Crypto trading, even buying inventory for your business, it is very important to average your cost per unit. This is very simple but I'm always surprised how many don't know about it.I keep it simple to the point and don't consider trading fees etc.I buy 100 shares for $10 each
My cost: $1000 , hoping it goes up, so I can sell for profit.
What if it doesn't?
Let's say the price per share drops to $7 .... PANIC? SELLLLL? Take your losses?I buy another 100
Cost for this deal: $700Now I hold 200 shares for the cost of $1700
I just reduced the price per share to $8.50One more time the price drops, $5I buy another 100
Cost for this deal: $500Now I hold 300 shares for the cost of $2200
I just reduced the price per share to $7.30Finally the share starts rising and goes to $9
Now I take profits
I hold 300 shares, sell for $9.00, a total of $2700
My profit is $500
when the price is 10% less then when I initially started investing in that share.
If I would have just held my original investment, I still would be 10% down.
In order to be profitable in trading, you not only need MONEY but also TIME.
You only can lose if a share drops and never comes back, or if you panic and sell to early.AND THAT'S HOW I MAKE MYSELF FEEL LIKE A GENIUSHope you enjoyed this small example, thank you for reading
All the best
Gunter Nezhoda
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Gunter for President 1975.
Sorry, I'm late
Just be sure you dont apply that to a stock like SHLD or some other that is on their way out of business.
You are referring to one particular stock, of course that will kill your profits. If your portfolio is diversified, as it should be, other positions will compensate.