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Unsettled Cash

Discussion in 'Ask any question!' started by User2897, Dec 12, 2016.

  1. User2897

    User2897 Member

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    Hey guys,

    I sold my shares of TTI and I wanted to buy AKAO at $9 but the customer service representative at TD Ameritrade told me that the SEC has a rule and it is going to take three days for me to get my cash.

    He said I could invest on margin and they would charge me interest. I declined.

    Have any of you ever invested on margin?

    Did any of you make money today? If so, on what?

    What do you think will go up this week?
     
    StockJock-e and Tiptopptrader like this.
  2. Tiptopptrader

    Tiptopptrader Well-Known Member

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    Never Margin.

    As AKOA soared 148.19% today and has a RSI of 90, there could be a possible pull back tomorrow on profit taking. I don't know anything about the stock but it is risky to buy immediately after such a pop.

    upload_2016-12-12_16-39-7.png
     

    Attached Files:

    T0rm3nted likes this.
  3. User2897

    User2897 Member

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    What should I buy? Twitter?
     
  4. StockJock-e

    StockJock-e Brew Master
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    Yeah, thats called the T+3 rule, it takes time for cash accounts to settle, thats why trading on margin is better, you can get out of one trade and right into another as fast as you want.

    Margin allows you to trade with more money than what you have, but you don't need to.

    Just open an margin account and trade like you normally do, don't go over your cash balance and there is nothing to worry about.
     
    stock1234 likes this.
  5. T0rm3nted

    T0rm3nted Moderator
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    As a general rule that I follow, and tell people they should as well (though it's obviously their choice), on HUGE pops like that, you don't want to chase. TTT mentioned it above, but people who caught the ride up are going to be taking profits. Think about it, if you randomly made 148% overnight, would you hold on to it and see what happens in some smaller cap company, or would you sell and take your money off the table and not look back? I'd be taking my profits and looking for something else to invest in.

    Also, I may be overstepping my bounds and you can let me know if I am, but I feel like you're a younger (or at least new) investor. I'm guessing you aren't very familiar with the market and seem to be trying to do more of a "gamble" approach to try and get rich quick, instead of doing some studying, learning how it all works, paper trading until you learn, and slowly grinding your way to financial stability. I'm only 28 myself, and see the allure in trying to get rich overnight, looking for the next 100% gainer real quick, etc. I'm a gambler at heart, so I get it. Thankfully when it comes to the stock market, I am not that way. I've heard way too many stories about people who set themselves back a few years because they chased losses, bought at peaks instead of waiting for good entries, forced trades just to have action, etc. I'm genuinely only bringing this up to you because I care about people on this forum, and everyone in general, and don't want to see people lose money on something that somebody hyped up to them so they just stuck their money in and slowed down their growth.

    I'm sure you understand compounding. If you have $1000 and you make 10% you now have $1100. This means you have more capital to now make more money with. Now if you make 10%, you're making $110 instead of $100. This is why it's so important to continually make money, and not gamble. If you are in an extremely risky stock (like AKAO), you can very easily drop your $1000 to $600 in one day because it could keep dropping while you keep chasing and waiting for it to go back up. Now you are going to be down to $600. You either have to deposit another $400, or you now need to make tremendous gains somewhere else to get back to your starting amount. If you would have invested in something a little less risky, and had a TRADE PLAN going into your trade where you cut your losses, you can make it back on another trade fairly easily.

    It's important to set yourself some realistic goals. I've given many young people like me this advice, and suggest you consider something similar. Sure you can try to get rich, but like most gamblers, you will lose whatever you make. You can only gamble and win so many times before you end up losing it and 5 years from now saying to yourself, "If I would have just played it safer, tried to make 10% on a few trades equaling 10-20% on the year, I'd have SIGNIFICANTLY more money than I have now". Instead it's 5 years later, I have less money than I started with 5 years ago, and I now have less lifetime left to make that money. I just want you, and everyone here to set realistic goals, and realize you can make a lot of money. You can retire early. You can see financial stability for you and your kids, and you can enjoy that money if you can just shoot for 10% a year.

    For example, I have a goal to make 10% a year. Between my employer and my contributions, I did the math, and if I work 30 years and leave it in cash, I will have around $600K. If I make 10% a year, I will have $2.1M in 30 years. If I save $1000 a month in a savings account (obviously not everyone can do this, it depends on your income, bills, etc.), I will have $350K in 30 years. If I make 10% a year on that, I will have another $2M in 30 years. You can see my point here. If you set yourself back 5 years, it's not like you just subtract the cash that you had, you have to realize that the compounding you are making (10% extra a year on the total money you have in an account) is going to make a lot more money than if you start 5 years from now because you kept making big gambles on extremely risky stocks. Now obviously if I'm on track, making 10%+ a year in both accounts, etc. I will not work the full 30 years. I could retire in 15 years as an example and spend more time improving that 10% because I have shown that I know what I'm doing by that time, and can "safely" assume I can at least depend on roughly those returns over time. I should note that my 401K I can invest in whatever equities I choose, I thankfully have that freedom.

    The whole point I'm trying to get across is that if you start doing things the right way sooner, you'll be glad you did. You can make some real good money. I'm sure you can do the math and figure it out. Keep in mind, most people would be THRILLED if they can make 10% a year every year for X amount of years. It's something most people don't do. You've heard the success stories of people who have gotten rich quick, people who are now multi-millionaires because they beat the market for insane amounts, but those are not the normal story. The normal story is not that easy, and involves a lot more pain and suffering. Spending sleepless nights because early on you lost 50% of your portfolio overnight because you were in some biotech company that dropped 50% overnight. Just an example, of course.

    I know I rambled, and this ended up being much longer than I meant for it to be, but the whole point is, do the math, figure out how much money you could have down the road at a fairly young age still, and decide if you think you're better off that way, or gambling and trying to hit huge gainers, hitting one, then missing the next, and having your $1K become $500. Depositing another $500 that you save up, repeating the same process, and a few years down the road not having anything to show for it.

    A glimmer of hope to getting rich though, I'm up 30% in my 401K this year (obviously I know this is not the norm, I will rarely make returns like this, and I know there will be years I lose money). If I make 30% every year for 30 years, I'll end up with $104M in my 401K ;) Trust me, I know it's not going to happen, but it's a fun little thought that if you play it right, shoot for realistic returns in your trades, wait for good entries, take your profit, etc., you can still get rich.

    Hope this helps.
     
  6. T0rm3nted

    T0rm3nted Moderator
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    Haha, you guys make me laugh.
     
    Jacob likes this.
  7. stock1234

    stock1234 2017 Stockaholics Contest Winner

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    Yep margin account is way better
     
  8. StockJock-e

    StockJock-e Brew Master
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    Ask 3 people, get 4 different answers! :D
     
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  9. bigbear0083

    bigbear0083 Content Manager
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    Can I nominate @T0rm3nted's post for reply of the year here on Stockaholics? :D

    http://www.stockaholics.net/threads/unsettled-cash.3715/#post-36954

    That was seriously an awesome post, and I almost want to save it as a way for future reference to newcomers who might come along here with similar questions.

    Thank you for taking the time to write that all out Chris. That was a beauty. :cool:
     
    Jacob likes this.
  10. T0rm3nted

    T0rm3nted Moderator
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    Thanks man, appreciate the kind words and likes from everyone. I just hate seeing new investors get suckered into the extremely volatile, high-risk gamble plays and setting themselves up for "starting over" a few years down the road. It's better to get started on the right path ASAP. I'd love to retire by 45 ;)
     
  11. User2897

    User2897 Member

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    I started with $10,000 and I invested in a smaller biotech company called Marinus Pharmaceuticals MRNS. I bought 9000 shares at $1.095 and made over $600 in one day. I kept it until it was at $0.94. I was so focused on that $600 that I was convinced it was going to go back up to the $5 range. I am currently down $1176.
     
  12. T0rm3nted

    T0rm3nted Moderator
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    That's exactly my point. You should never have 100% of your money invested in one equity. You need to do some reading about diversifying your portfolio, money management, and setting realistic goals. You can continue to gamble your money, but you have to remember that it's not just the one loss that hurts, it's the fact that now when you make 10% on something, it will be less than it would have been had you either taken profit, not invested, or cut your losses sooner. Smaller cap biotech companies should only be VERY small plays where you're playing around with profit, in my opinion of course. They're too risky. Sure you could make 50% over night, but you could MORE likely lose that amount. There's a reason most gamblers in the stock market end up starting over a few years later, and being years behind where they could have been if they just spent 1-2 months researching diversification, money management, setting goals, trade plans, technical analysis, etc. While doing that, try paper trading. Keep your investments in your paper portfolio the same size you would have kept them in your real money account so that when you switch over, your position sizing is the same and something you're used to. Taking that couple months could be the difference in making 10% this year, or 5 years from now having only $10K still because every year you added $10K and lost it. You're looking at possibly the following 2 scenarios. Let me try to put it in bullet point.

    Losing Situation
    • Start with $10K
    • Invest in MRNS lose $600
    • Invest in TTI lose $576
    • Invest in AKAO lose $2000 (just an example of how much you could lose tomorrow if you invest in AKAO)
    • Repeat with a few more and end up with $5K
    • Year 2 rolls around and you add $5K to your account to get back to your $10K
    • Make a few investments, make a decent amount real quick, SWEET you have $15K
    • Make a larger bet because you feel good about yourself, damn, you lost your $5K again because you invested in an extremely risky stock.
    • Lose a little more here and there over the course of the year, back to $5K again
    • Insert another $5K to your account, repeat year 2 scenario.
    • Year 3-5, you're back where you started off, you've deposited $30K to your account, and you still have $10K.
    Winning Situation
    • Set realistic goal of 10% a year
    • Start with $10K, end year 1 with $11K
    • Add same $5K as previous situation above, $16K
    • Year 2 you have $16K, make 10% and you now have $17.6K
    • Add same $5K as previous situation above $22.6K
    • Year 3 you have $22.6K, make 10% and now you have $24,860.
    • Add same $5K as previous situation and you now have $29,860
    • Year 4 you have $29,860, make 10% and now you have $32,846.
    • Add same $5K as previous sutation and you now have $37,846.
    • Year 5 you have $37846, make 10% and now you have $41,630.

    See how maintaining your capital is extremely important? Every year when you add your money and you make your 10%, you will make MORE money every year. The more money you have, the larger amount of money your gains become. You dumped in $30K in this example (10K to start, and 5K each year the next 4 years). Your $30K can either be $10K if you keep gambling, or $41.6K if you just shoot for your 10%. The next year you'd make 10% which would be an even larger amount, and repeat every year after. Obviously your gains would be even bigger if you deposited more money, or made 15% instead of 10%. If you shoot for a realistic number though, you're more likely to not chase, stick to your trade plans, and have less sleepless nights where you take the $10K you have and lose $1100 in just a few days.

    It's your money and you're obviously entitled to do with it what you please, but I can almost guarantee that if you stick with the route you're on, you will be worse off than if you would stop trying to get rich overnight.

    I wish you the best of luck with whatever path you take though.
     
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  13. Tiptopptrader

    Tiptopptrader Well-Known Member

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    @Charrima

    Chris is giving you the straight scoop in both of his posts, so you should take heed.

    To reiterate on Margin's. I said never meaning for me. I keep a substantial amount of cash in my account so there is really no reason to borrow, pay commission, and interest. For some experienced traders it is ok but even they can get burn't if not too careful.For a new trader like yourself don't even consider trading on Margin.

    You really need to learn TA even trading a good stock. It is about getting a good entry price and exit price and patience is required in most cases.That is the way you make money.

    TTT
     
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