Hi everyone I am a Newbie here so forgive this question if it seems stupid. I have a meger amount invested in the stock market. I have never been a daytrader (thats a little lie I subscribe to a pennystock website before but it didn't work out). But I noticed one bank stock that I have had for over a year drops, goes up, hovers around $20. So basically a few times when it dropped in the low $19s I bought $12,000 worth of stock, about 580 shares. I then waited. Some times a few days, sometimes more than a week but eventually the stock would go up and I would sell for $250-$600 profit. Then I would wait (again sometimes a week or more) for it to drop and do it again. I have only done it three times. I went with the attitude that I think this is a great stock and if it does go down some....I'll let the money ride as a long term investment cuase I have faith in the stock.
Ok questions
Is what I'm doing stupid?
Is it what they call swing trading?
And finally are there any lists of stocks that behave like that? I don't mean penny stock that can go under but well established stocks from 10-20 bucks a share that have a history of going a few bucks under and a few bucks above a base line?
Thanks for your help.
given your "meagre" account size, the technique you described and your mindset that you wouldn't object to owning the stock even if it went a little lower, you could consider using Options - either Covered Call or Naked Put..
Covered Call - next time you buy the stock at $19, you sell the $20 Call.
Let's say for arguments sake you get $0.40 premium for such a call.
If the price moves up to (or beyond) $20 then you will make your usual ($20-$19) $1 profit plus the $0.40 premium
the downside is that price might shoot up to $25, you'd still have to sell at $20; but if you'dlanned to sell at $20 anyway you would have done so before the price moved up anyway, (unless it gapped up)......
If for some reason price doesn't reach $20 but stays above $19, you can keep the stock AND the $0.40 premium (and write another $20 Call for the next month, thereby earning another premium and bringing your breakeven down even further)
If the stock drops below $19, well you've received a premium of $0.40, so your actual breakeven point is now $18.60
and premiums earned in subsequent months by writing other Covered Calls on the same stock will bring your B/E point down even further
Naked Put - next time the stock hits $19, you write the $18 Put which means you will be obliged to BUY the stock at $18 even if it tanks.
for arguments sake lets assume you receive a premium of $0.40 for this.
If you're right, and price moves back towards $20, you keep the premium.
Even if it drops but stays above $18.01 you keep the premium (nobody is going to force you to buy at $18 whjat they can unload on the open market for $18.01)
At this stage you still haven't purchased any stock, yet you keep the premium.
If price does tank and your option is excercised, you buy the stock at $18 but your breakeven point is $17.60
That's $17.60 on a stock that you were prepared earlier to pay $19 for !!
Of course the naysayers will warn you about the dangers of being commited to buying a stock at $18 when it could crash to $5 or less. But 1) you can always buy yourself out of your commitment, it will cost you something though, and 2) this was a stock you were happy to buy at $19. What do the naysayers have to say about you paying a dollar more for a tanked stock, how does that benefit you ?
Options don't suit everyone and the examples I have given are somewhat simplified.
But given the parameters to your trading that you mentioned above, I'd suggest either play is worth investigating ...
good luck, hope it helps .........
