melson
2022-10-09

if you buy 1 stock at $3 and the stock keeps sliding, you cut loss by selling at $2 (and short another 1 share at $2, thank you @maricel for pointing out), the stock continues to fall to $1 and you bought it again seeing the price is attractive. the stock rebounds to $2. do you breakeven? diluted cost says (3-2+1)/1=2. but in actual fact, you have already broke even. in fact, you earned $1 profit. why? because you shorted with your share at $2 and bought back at $1 this earning $1. then the stock rebounded from $1 to $2, you earn $1 again. so total profit is (-1+1+1=1)


the moral of this story is that you have to short with your own stock and start doing your book keeping. sell half or everything at each huge rebound. buy back again at new lower low. this is a bear market and new lows will be made. good luck.

Modified in.2022-10-11
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Comments

  • 財運到財源滾滾到
    2022-10-09
    財運到財源滾滾到
    This is good if you can predict down to $1❗️It is better to do $ cost averaging. when price down you can determine the $ average price you want to get by how much amount you going to buy in.
    • 財運到財源滾滾到: 
      🙏Bonne chance❗️
    • melsonReply財運到財源滾滾到: 
      de rien. bon courage.
    • 財運到財源滾滾到Replymelson: 
      Thanks for sharing，an exchange idea🙏
    • melson: 
      true true, just illustrating that diluted cost does not reflect the earnings from shorting with ur own shares.
      there are more complex ways to short and dca at the same time. coupled w technical indicators, u can recoup ur losses n even profit w/o the price ever going back to ur initial buying price
  • winwin123
    2022-10-09
    winwin123
    Good illustrations
  • maricel
    2022-10-09
    maricel
    [Helpless] [Helpless]
    • melsonReplymaricel: 
      very good, you are natural trader to spot the flaw, i missed out on writing having to short another 1 share at $2 after selling my existing share at$2. thank you very much for pointing out.
    • maricelReplymelson: 
      the illustration in your post is flawed
      you will end up losing money by trading your way even when it's breakeven
      because of trading charges
      next better player?
    • maricelReplymelson: 
      if you consider the selling at 2 and buying back at 1 as shorting your own stock at profit of 1 dollar
      means your original stock purchase price remains at 3
      rebound to 2 and you sell it, you're selling at a loss of 1 dollar
      profit of 1 dollar match with loss of 1 dollar = 0
    • maricelReplymelson: 
      buy at three, you sell at two
      your loss is one dollar
      drop to one, you buy at one
      total cash outflow is two, one dollar loss plus one dollar for share
      rebounds to two, you only manage to breakeven if you sell at two
      not profit four dollars, net is zero
    • melson: 
      let's say you have$3 in your account
      you bought 1 share at $3
      share price keeps dropping
      so you sell at$2 and buy back at $1 you earn$1.
      when share price rebounds to$2, you earned$1 because you bought at$1.
      now your account has 3-3+2+1+1=4.
      try it with real dollar bills and you will see.
  • Jason1616
    2022-10-09
    Jason1616
    Thazt if you can catch the bottom. 🤣
    • melson: 
      many stocks are behaving this way
  • smee
    2022-10-09
    smee
    like a math problem
  • Cheahkim
    2022-10-10
    Cheahkim
    好
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