# Trading big with one share



## TheUnknown (16 January 2014)

Was thinking today for those exp traders, does anyone actually buy say $300k worth of 1 share and sell once up by a little % rather then hold onto it? OR Do majority of traders divide that amount into smaller lots? I think if you stick to a blue chip share and get the timing right you could make a decent profit, that's if no crash happens.

Take for example CBA sometime in Dec it was trading at around $73 and hit a high of $79. 

Say you purchased 4000 shares of cba @ $73.00 and sold them at $79.00.

That's a profit of $24,000 minus brokerage and tax. Not a bad return for 5-6week work.


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## tech/a (16 January 2014)

*Re: Trading big with one share.*

And tying up $300k
Sure you can certainly do that.
Or you can trade a fut 
Around the same exposure / contract ( index)
margin 6k.


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## Valued (16 January 2014)

*Re: Trading big with one share.*

If you want that much exposure then as Tech/a said you should look for derivatives on margin. If your trading capital is 300k though, putting 300k into one stock is a bad idea. If there is an overnight gap down you lose a lot of money.

Perhaps you could talk to a qualified professional about the best derivative or trading strategy for you. Tech/a mentioned futures. There are also CFDs and options. These can allow you to gain a large position in a stock while only using a small amount of your capital. However, people can get wiped out since they will say have 300k of trading capital and put on 300k of exposure on one trade. The stock gaps down on bad news, a margin call is triggered, you cannot pay it, you get your position closed out then game over. You might not lose everything but you could lose a lot of money. Of course, you can hedge CFD positions. This gets rather complex though so if you do have 300k and a bit unsure, definitely seek professional help.

There is nothing wrong with just buying shares too, just not your entire trading capital in one go.


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## skc (16 January 2014)

*Re: Trading big with one share.*



TheUnknown said:


> Was thinking today for those exp traders, does anyone actually buy say $300k worth of 1 share and sell once up by a little % rather then hold onto it? OR Do majority of traders divide that amount into smaller lots? I think if you stick to a blue chip share and get the timing right you could make a decent profit, that's if no crash happens.
> 
> Take for example CBA sometime in Dec it was trading at around $73 and hit a high of $79.
> 
> ...




OR CBA goes from $79 where you bought down to $73. You've lost $24k plus brokerage. What do you do? Do you hold or fold? Just because it's CBA doesn't mean you can't go lower. 

When you come up with a trading idea that feels like easy profit... always look at the flip side and assess the risks.

Trading a a position that is too large for your own good will likely lead to irrational behaviour, especially when things go against you.

Your exposure level should be controlled and unexciting. If something goes wrong and you blow up your account - that's too much exposure.


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## beachlife (17 January 2014)

Most traders look at risk first, not the size of the trade; that comes second.

The first thing you should consider is how much you are prepared to lose if the trade goes wrong.  As an example consider the 2% risk that seems so popular.

2% of $300,000 is $6000 at risk.

To buy 4000 shares then your stop needs to be 6000/4000=$1.50 below your entry.

If that stop point fits with your trading plan then no problem to put $300k into the trade, and no need to leverage into cfd's, ISF's, or options if you have the cash.

Gaps of up to $2.50 are possible on CBA so that would need to be considered as it would be outside the stop limit.  If you widen the stop then you would buy less.


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## tech/a (17 January 2014)

beachlife said:


> Most traders look at risk first, not the size of the trade; that comes second.
> 
> The first thing you should consider is how much you are prepared to lose if the trade goes wrong.  As an example consider the 2% risk that seems so popular.
> 
> ...





Firstly I think you could become an expert in one stock just as you can in one commodity or index.

Secondly this 2% rules is an arbatory figure suggested as an amount that will see risk of ruin greatly deminished as against higher percentages.

(1) 2% 1% 5% whatever can be used as a guide when position sizing. 

(2) there is no reason why you can't move your stop to B/E as soon as practical ---- limiting your risk to brokerage. This of course has the effect of dramatically lowering your risk to reward on closed trades.
Further minimizing exposure to capital.

(3) I think the question should be ---- NOT how much am I prepared to lose ----- which personally I think is crazy
I don't know anyone who is " prepared "  to lose for the sake of loosing --- any amount.
I think the question SHOULD always be ---- how much WILL I lose before the market proves my analysis totally wrong?
This should then give a clear understanding of risk before the trade and if you wish to use fixed fractional position sizing you can armed with this info.
With the ability to alter your out come with suggestion (2)

I also think diversification can be a hinderance to wealth.
It's use as a risk mitigation tool is poor at best and lazy at worst.


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## Valued (17 January 2014)

Beachlife If you have an account of 300k to trade with you cannot put 300k into one trade even if your stop loss is $6000 or $4000 or whatever. The reason is that there is a risk of gap downs. You can lose half your account in one night. You might say this is rare but if you do trades like this every day for 10 years or 20 years or however long you trade for, it will likely happen one day. 

If you're going to leverage a lot of money or put a lot of money into something, you must consider hedging it against overnight gapping risk. With OTC CFDs there are guaranteed stop losses but these can be expensive and on unfavourable terms. You can also use options. They do reduce your expectation but at the same time if you are leveraging 19:1 or even higher, the small premium is reasonable compared to the extra gain of the leverage. For example if you have a 100k trading account and you have a 2% risk per trade, if you had a $2000 stop loss you could put down $2000 into a single CFD trade with $40,000 exposure and not lose sleep at night if you had a guaranteed stop loss or you have hedged with options so that the maximum downside for you is say $3000 in case of a rare gap down of huge proportions (by buying a cheap out of the money option).

I am not saying these would be the best instruments to trade with for the thread starter's circumstances, but rather just food for thought about how you might go about hedging the risk of getting wiped out/losing your house/going bankrupt since you put everything into one basket.


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## tech/a (17 January 2014)

If CBA gapped 50% overnight 
so would everything else.
A spare $100K---(or more) would come in handy in the morning!

If you've got $300K in one share I doubt a 50% gap down once or twice in a lifetime is going to cause loss of house! Particularly if you bought it at $40 in the first place.
There is an inherent risk walking out the front door
We don't walk straight in front of a bus.
nor do we place $300K in one stock which has a high likely hood of decreasing in value in one night
The question is ---which night?
Having a continual hedge will diminish profit.

There are times to be fully invested and times to not be.
If you have $300k you will be smart enough to at least have a rudimentary knowledge of risk mitigation and risk possibilities.


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## burglar (17 January 2014)

tech/a said:


> ... I also think diversification can be a hinderance to wealth.
> It's use as a risk mitigation tool is poor at best and lazy at worst.



Agree!
If you put your eggs in many baskets, sometimes ... ,
many baskets fall.


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## beachlife (17 January 2014)

Valued said:


> Beachlife If you have an account of 300k to trade with you cannot put 300k into one trade even if your stop loss is $6000 or $4000 or whatever. The reason is that there is a risk of gap downs. You can lose half your account in one night.





The op didnt say anything about leverage, so if be buys $300k of CBA with cash funds and the market crashes, he hasnt lost his account, just paper value of his portfolio, he still owns the shares.

But go back through the CBA chart and you will struggle to see a bigger gap than $2.50 that is against the trend, even in 2007/2008.  My data for CBA goes back to 1992, no sign of anything near a 50% move that would have gapped past a stop.  Possible, of course, nothing is imposible in the markets, but likely, no.  There is 0.000000001% chance of a 10% gap past a stop on CBA, let alone a 50% gap.

Hedging against the trend on CBA or paying for guaranteed stops would have have been a big waste of money since sensible stops would have done their job without any problem.

I'm not recommending he does it, just saying his scenario could be done based on a 2% risk model.  I wouldnt do it because the exposure is too low, I would leverage into more positions, just as I do now, but each to thier own.

By the way the govt bank acc guarantee has been reduced to $250,000 so there is now a risk of a $50,000 over night loss if you have $300k in a bank that closes its doors.


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## Valued (17 January 2014)

beachlife said:


> The op didnt say anything about leverage, so if be buys $300k of CBA with cash funds and the market crashes, he hasnt lost his account, just paper value of his portfolio, he still owns the shares.
> 
> But go back through the CBA chart and you will struggle to see a bigger gap than $2.50 that is against the trend, even in 2007/2008.  My data for CBA goes back to 1992, no sign of anything near a 50% move that would have gapped past a stop.  Possible, of course, nothing is imposible in the markets, but likely, no.  There is 0.000000001% chance of a 10% gap past a stop on CBA, let alone a 50% gap.
> 
> ...




Tech/a recommended margins which is why I mentioned it.


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## tech/a (17 January 2014)

Valued said:


> Tech/a recommended margins which is why I mentioned it.




On a fut!


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## TheUnknown (17 January 2014)

Well I just gave it a go with smaller amount $25k went and purchased SUL when it went down 20% this morning. made a little cool profit. as Nick Radge said if it goes down 20% it will go up again. I will give the $300k a try once an opportunity arises and will post it.

- - - Updated - - -

Don't know how to trade futures if I did I would do what tech/a said.


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## CanOz (17 January 2014)

> as Nick Radge said if it goes down 20% it will go up again.





lol....

I don't think Nick would have said this. Perhaps you're thinking of the 20% flipper. It works on a premise similar to this....if an equity has dropped 20%, recovered that 20% and we're in an uptrend, then buy it as it must return 20% first before it goes onto become a multi - bagger...i.e. 100 - 200%

To take that out of context the way you have is a recipe for disaster. 

I think the Mods should remove that before someone gets severely reamed...


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## tech/a (17 January 2014)

CanOz said:


> lol....
> 
> I don't think Nick would have said this. Perhaps you're thinking of the 20% flipper. It works on a premise similar to this....if an equity has dropped 20%, recovered that 20% and we're in an uptrend, then buy it as it must return 20% first before it goes onto become a multi - bagger...i.e. 100 - 200%




Definitely not.


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## beachlife (17 January 2014)

TheUnknown said:


> purchased SUL when it went down 20% this morning.




Now that's a gap!    Have a look at what QBE did after a gap like that....

I think you need to start a thread about your entry criteria.


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## Julia (17 January 2014)

beachlife said:


> But go back through the CBA chart and you will struggle to see a bigger gap than $2.50 that is against the trend, even in 2007/2008.  My data for CBA goes back to 1992, no sign of anything near a 50% move that would have gapped past a stop.  Possible, of course, nothing is imposible in the markets, but likely, no.  There is 0.000000001% chance of a 10% gap past a stop on CBA, let alone a 50% gap.



That's how I see it also.  If the $300K is the total of the OP's investable capital, then I don't think I'd be putting it all into CBA but that's more my natural aversion to risk than any genuine belief I could lose anything like half of it.

$300K might be, however, 10% of his account.

Even if you focused on getting on an uptrend and simply holding until it reversed, eg just in the last two years CBA has gone from $50 to $75, plus your grossed up yield is around 7%, that seems sensible enough to me



tech/a said:


> I also think diversification can be a hinderance to wealth.



Agree.  Traditional wisdom would insist on the inclusion of either or both RIO and BHP.  If you'd split your $300K into these plus CBA, say over the last two years, you'd be well up on CBA and have gone nowhere on the other two.  



tech/a said:


> If you've got $300K in one share I doubt a 50% gap down once or twice in a lifetime is going to cause loss of house! Particularly if you bought it at $40 in the first place.
> 
> There are times to be fully invested and times to not be.
> If you have $300k you will be smart enough to at least have a rudimentary knowledge of risk mitigation and risk possibilities.



Agree.  The OP wasn't suggesting this level of investment in some speccie miner.


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## Porper (17 January 2014)

TheUnknown said:


> as Nick Radge said if it goes down 20% it will go up again.




He definitely didn't say that, you have misunderstood somewhere along the line.


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