Stock Trading Quick Tip: The Math Trap

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Watch as ClayTrader presents a Stock Trading Quick Tip. In this tip ClayTrader touches on “The Math Trap” a simple concept that is often overlooked when learning to trade stocks. Check out this quick tip as well as other videos from ClayTrader.com to improve your stock trading and technical analysis skills.

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Comments

D com D com says:

Thank you explained what I know in math. Humanity needs this kind of information

fredrickkc says:

You are at 10 and loose half which is 50 % loss and now your position is 5. It is true that in order to break even you need 100% of 5 which is also equal to 50% of 10(original). That fact that we have 50% in one equation and 100% in another does not mean that the 2 don't equate.

Forhad Khan says:

In this pointer ClayTrader touches on “The Math Trap” an easy principle that is frequently neglected when learning how to trade stocks

edgehead13 says:

in cases like that, just keep investing into the stock which is very risky. if you buy 10 stocks for $100 and it's dropped down to $5, buy another 10 stock. now you have 20 shares for $150. now that brings down the price per share to $7.50.

Ocean Post says:

Whats your degree? I couldnt hear

mongoosevsgt says:

for those having brain farts its quite simple to understand: starting from 10 you are at 100% going down(minus); starting from 5 you are starting at 0% and going up(positive). which is why those percentages make a difference. so 10 – 5 = 50% loss conversely 5 + 5 = 100% 5 + 2.5 = 50% even though you still have 5 bucks invested

VideoMenu says:

Ah, vedy vedy intadesting!

ps. Thanks for doing all the plugs at the end. Amateurs (from finance to tech to gardening) insist on plugging their various media up front and by the time I listen to it for the 10th time on the 10th video I've bailed on them s a regular viewer forever.

jonavuka says:

this doesn't tell much…so we have to develop a strategy to look at this? What do you do if it drops an x amount? I don't get it…it just presents a problem and then leaves it there

kilaz lesliet says:

Makes sense! Because you are playing with your $.

jose alvarez says:

what broker service do you use?

carlos garcia says:

in other simpler term.

10-5=5= 50% change
5+5=10= 100% change

StockTradingMaster says:

Excellent video Clay. Folks, don't argue with Clay, just take a calculator and do the math yourself. Multiple 50% by 100 which equals 50. Now a 50% gain from 50 (multiply by 1.75) equals 75, not the same 100 you began with.

Jorge Santacruz says:

Im still learning on this subject, but its under my impression that its all relative to the initial point where the investment is commenced….still trying to wrap my mind around this. Im practicing with small investments.

So in other words:

Lets say starting point of investment is at $5 goes to $10.
Ive made double…..thats considered 100% win

Now if I start at $10 and drops to $5 / thats a 50% loss

And the reason why it takes twice to go back to 100% is because the stock's value dropped, and you have lost! Thats how the others make money.

Only thing is to wait for it to slowly pick up to its original worth where you first start and (when more people start buying stocks and investing, and if the company starts doing better and its worth increases)

Good luck to all of you starting just like me :)

Antonio Montana says:

Would you say that shorting is likely a more profitable strategy than going long when trading? I am pretty risk averse but still like to capitalize on opportunity, I do not however like the idea of margin because of the need to buy shares back. I also am looking to swing trade rather than day trade because of my full time job, what are your thoughts clay trader? Great videos by the way!

AdamAfA says:

Or if you look at it in terms of shares, loose 50 shares you have to gain 50 shares to make it up… the fact that 50 percent of 5 is less than 50 percent of 10 is not some great insight, lame

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‫مكياج عيون Sandie‬‎ says:

My favorite trader on YouTube. Fantastic. I love the way you concentrate on few stocks. Can you please tell me which broker you use, I love level 2 with chart and quick entry exit. It's superb, love it. I hope you answer me.

Maverick Oxenator says:

Wow, very interesting. I never noticed that, thanks for bringing it to my attention (I'm a novice part time swing trader 😀 )

Zultan says:

Makes sense to me and it's something I wouldn't have ever thought about.

guillermo salas says:

its why it pays to have an engineer gf with a masters in math that knows control theory and algorithms like the back of her hand. hehehe but i do like your vids keep up the good work.

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