Would my calculations be right?

kazss11 · 8 October 2010

Okay I have been watching the markets and a few particular stocks, I am very new to this and I am wondering if I am on the right track.

On ASX watch list I purchased a few imaginary stocks, now I purchased them at $3.70 and yesterday after what looks to be heavy trading, the price went up $3.85.

If I had a 1000 share's amounting to $3700 and decided to sell them at $3.85, an amount of $3850, I would have made a profit of $150.
After taking way a brokerage fee of say $30, would my end profit be $120 ?

So basically i'm asking if brokerage fee would be that set amount and would their be any conditions other than that, to make the profit of $120?

Thanks.

tech/a · 8 October 2010

You got it!

Junior · 8 October 2010

Correct.

The other consideration is tax.

ParleVouFrancois · 8 October 2010

You'd have to deduct brokerage once for each way, 21.90 for comsec (I'm sure there are other cheaper rates out there), this consideration along with tax implications means that you'll need a big capital base to make shares worthwhile to start off in. I use the word "big" in the sense of maybe 10,000 dollars (my opinion only, more or less can be used but the brokerage costs become a higher % forcing you to chase riskier higher return stocks, not an ideal situation).

kazss11 · 8 October 2010

Thanks everybody.
So in regards to the capital base, i've been advised $2,000 but is $10,000 more idea in terms of spreading out brokerage costs, so my profits are worthwhile?

Julia · 8 October 2010

Kaz, the other aspect you might consider is letting your profits run (if the stock is in an uptrend) rather than taking small profits such as the few cents per share in your example, thus not incurring brokerage when your profit hardly makes it worthwhile.

kazss11 · 8 October 2010

Julia said:
Kaz, the other aspect you might consider is letting your profits run (if the stock is in an uptrend) rather than taking small profits such as the few cents per share in your example, thus not incurring brokerage when your profit hardly makes it worthwhile.

I'm looking into that aspect too.

Thank you.

So_Cynical · 8 October 2010

You have now prob also realised that 1000 shares costing 3.70 each, just isn't a big enough position to make decent money on a share price move of 15 cents....double it to 2000 shares and your profit for the same 15 cent move has doubled to $260 after (comsec) brokerage, now $260 is a reasonable amount of money to make on a trade over a smallish time frame.

Now extend the time frame a little and a bigger % move becomes possible/likely and thus the profits/losses start to get interesting...add leverage or double your position size again and its all very exciting.

brty · 8 October 2010

So_Cynical

now $260 is a reasonable amount of money to make on a trade over a smallish time frame.

If you are paying $15-$20 per side for such a trade, then this is exactly how small punters go broke. This would mean spending ~15% of your profitable trade on "costs" even if using 'free' software to work on trades. You need an exceptional edge to overcome such odds, not something a new trader is likely to have.

brty

So_Cynical · 8 October 2010

brty said:
So_Cynical

If you are paying $15-$20 per side for such a trade, then this is exactly how small punters go broke. This would mean spending ~15% of your profitable trade on "costs" even if using 'free' software to work on trades. You need an exceptional edge to overcome such odds, not something a new trader is likely to have.

brty

Yeh and that's all part of the argument i was putting forward, double the position, double the profit with the brokerage (costs) staying the same...everyone doing this for the first time runs through all the numbers.

Just looking at my portfolio report, turns out ive spent 1.8% of my portfolio value on brokerage...i suppose that's not to bad.

kazss11 · 9 October 2010

So_Cynical said:
You have now prob also realised that 1000 shares costing 3.70 each, just isn't a big enough position to make decent money on a share price move of 15 cents....double it to 2000 shares and your profit for the same 15 cent move has doubled to $260 after (comsec) brokerage, now $260 is a reasonable amount of money to make on a trade over a smallish time frame.

Now extend the time frame a little and a bigger % move becomes possible/likely and thus the profits/losses start to get interesting...add leverage or double your position size again and its all very exciting.

Thanks for the example, yeah I did my calculations and it is way to small to start of with the 1000 shares, being a student i'm planning on spending my summer earning a lot of money and studying the markets properly.
Brokerage would be a killer for me if I was trading at such small amounts.

kazss11 · 9 October 2010

brty said:
So_Cynical

If you are paying $15-$20 per side for such a trade, then this is exactly how small punters go broke. This would mean spending ~15% of your profitable trade on "costs" even if using 'free' software to work on trades. You need an exceptional edge to overcome such odds, not something a new trader is likely to have.

brty

Hi, you mentioned software, is that referring to Comsec, Macquarie edge?

Thanks

brty · 9 October 2010

kazss11,

Hi, you mentioned software, is that referring to Comsec, Macquarie edge?

I probably got my terminology wrong. When it comes to computers, jargon and other hi tech stuff, I am out of my depth.

What I meant was what you use to make the decisions about which company to buy/trade. If it is 'technical' via some type of indicator/combination of indicators then just using the free daily charts from the internet was my assumption, like bigcharts.com. If using some fundamental information then just the company announcements from the ASX website will provide plenty of reading and study.

There are plenty here that have the latest and greatest software packages and downloaded data. This can cost thousands, yet in my opinion is not necessary for end of day share trading. What you need is an edge, a method of trading profitably from a known set of circumstances. You cannot buy an edge, they are not for sale.

brty

kazss11 · 9 October 2010

brty said:
kazss11,

I probably got my terminology wrong. When it comes to computers, jargon and other hi tech stuff, I am out of my depth.

What I meant was what you use to make the decisions about which company to buy/trade. If it is 'technical' via some type of indicator/combination of indicators then just using the free daily charts from the internet was my assumption, like bigcharts.com. If using some fundamental information then just the company announcements from the ASX website will provide plenty of reading and study.

There are plenty here that have the latest and greatest software packages and downloaded data. This can cost thousands, yet in my opinion is not necessary for end of day share trading. What you need is an edge, a method of trading profitably from a known set of circumstances. You cannot buy an edge, they are not for sale.

brty

Thanks for clearing that up.
I totally understand on the edge part, i'm learning the way to do that through reading and analysing the charts, with some more hands on I can develop that.

Would my calculations be right?

kazss11

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