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How To Calculate Stock Returns

How To Calculate Stock Returns

okay so moving on right let’s discuss right on how you can actually profit from stock trading right there are two ways to do it number one buy low and sell high this is something that you probably have heard many times there okay so just a quick example right this is the chart of Apple let’s say you know you buy low and sell high how it will look like is let’s say you buy around here one hundred and fifty five dollars and you sell and let’s say at this highs over here which is about hundred and seventy five dollars so the difference between your selling price and your buy price is $20 so you made a profit of $20 per share on Apple okay so that’s a profit of $20 per share on Apple so this means is that you know if you buy hundred shares on Apple your profit would then be two thousand dollars just 20 multiply 100 your profit is two thousand dollars right so we are talking from a individual share one share basis right but if you are you know creating 500 shares or thousand shares that you just multiply the number of shares accordingly and you’ll know what is your total profit okay so this is just one example another way that you can profit right from stock trading is this you buy high and sell higher so this is a concept that is hotly talked about everybody talks about you know buying low selling high but this right is an even more important concept if you askme buy high and sell higher okay it’s not a more important concept but it’s a it’s concept that I know many traders just you know are unaware of it so for this over here right what are you trying to do is that you want to buy high okay so let’s say for example over here I probably have a break out over here at this house let’s say you buy it about 100 and let’s make things simple you buy a hundred eighty five dollars and let’s say true enough right Apple did break out and it stay just wrong really and you move all the way up to let’s say again just to make it simple right $200 over here okay so you buy at 185 and you sell 200 again what is the profit just take your selling price minus your buying price and it’s a profit of $15 so if you buy a thousand shares that’s a profit of $15 multiply by a thousand which is fifteen thousand dollars but this time around right you notice that the difference is that you are actually buying I see this over here from the looks of this chart I seen that man you buying such a high price when the market is about to reverse okay why are you buying such a high price but here’s the thing about the markets right you never know how high a stock can go so that’s why there’s another way to profit which is to you know buy high and sell higher because the market or I could just as well you know break out and move right even further than your expectations or anyone else so I know right sometimes it seems scary to be buying high but hey you never know right the stock could actually explode higher and become higher so don’t worry about you know the precise entries techniques or when to sell we cover all that later later in the course but for now I just want you to understand right the concepts right behind you know profiting in the stock market you can buy low sell high or buy high and sell higher moving on right how do you actually calculate your stock trading returns right so there are three ways to do it number one you call it a dollar approach right so this is something that I’ve briefly covered earlier so what you’ll do is just to calculate the difference right between your selling price and buying price and the difference is the profit right you’ve made in dollars so again let’s say you buy it one hundred and fifty dollars you sell at two hundred dollars okay so your profit on a stock is $50 per share so if you buy a thousand shares that profit is fifty thousand dollars just the profit per share multiplied by the number of shares you’ve bought okay so that is your dollar return Knicks percentage return right so this one is a little bit different but again really simple stuff so for example let’s say you buy a pole share set hundred dollars okay and you let’s say you sell it at 150 dollars so what is your percentage return just calculate your profit divided by your initial share price then you bought so in this case you can see that the profit is fifty dollars per share so just like 50 dollars divided by the initial price of apple shares that you bought which is hundred and you get a profit of 50 percent simple okay and the last one is what I called our multiple right and this is actually my favorite approach to calculate your returns whether you’re trading Forex options or whatever right this is a more objective measure why is that because when you look at a dollar and percentage returns it does not take into consideration your risk poetry okay let me let me say that once again right when you late returns based on dollar or percentage he does not calculate or determine right the amount of risk that you’re taking to achieve those returns so I’ll explain so let’s say you buy Apple shares at hundred dollars okay and let’s say you sell it at a hundred and fifty dollars and let’s see for this particular trade of Apple right you’re either going big or going home you tell us stuff they know if Apple drops do you know zero dollars I’ll still hold it so you can see that your entire risk on this trade is a full hundred dollars and your profit on this trade is fifty dollars okay this is your full risk and this is your reward so from a risk to reward standpoint from a risk right let’s call it from a risk to reward you can see that you are actually risking okay a dollar to make fifty cents right how do you get it just very simple just divide this by a hundred differ at least 100 and you realize that for that particular trade you’re risking $1 to make 50 cents okay so this from a risk to reward endpoint is well not too attractive if you ask me compare this now to another trader let’s say you know this person this trader now he he in fact he makes less all right let’s say again he buy Apple shares at $100 and this time runner he sell Apple and let’s say only hundred and ten dollars but the difference between this trader now is that instead of risking that fool hundred dollars compared to trader a now this trader B okay he has a stop loss he has a predetermined price right where he would get out of the apple tree if things goes sour let’s say that that stop-loss I did exit price in his – $95 okay so now from the notes of theme of things right as yourself what is this percent risk per tree let’s do this together okay this person be his wrist but rate is let’s see let’s call Lee rispa tree is five dollars right 100 dollars the initial buying price – ninety five dollars which is the price that he’ll get out if it’s wrong the difference is five dollars what is his reward well every what is very simple right a profit write the ending price that is so – is buying price which is ten dollars so the reward is ten dollars so now when you couple it did right from our multiple his risk to reward you can see that he’s risking five dollars to make ten dollars right and if you just keep things simple right you realize that it’s actually he’s actually risking $1 to make two dollars compare that to the earlier trader who actually made more who made $50 per share right while you look at it from a risk to reward standpoint a person only made for every dollar he risk he made fifty cents who has four trader B here is a dollar to make two dollars so which is a better trader which is a better trade if you ask me for my risk to reward standpoint from are multiple standpoint trader B did a better trade so you can look at it from two ways right risking a dollar to make two dollars or you can just call it a multiple of two R we need to want to our you know that the person has risk a dollar to make two dollars if someone made a profit of 10 R this means that he risk a dollar to make ten dollars okay so this are the three different ways to calculate your stock returns I find that the are multiple is the most objective measure to calculate your stock returns so let’s do a quick recap number one how to profit from stocks you can either buy low or sell high or even do both and number two we talked about how to actually calculate your stock returns right either through a dollar based approach a percentage approach or the are multiple approach and my favorite is the are multiple approach because it tells you at how much risk you are taking to achieve those returns all right you


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