Trading Profits of A Swing Trader: Our Basic Formula

The Starter Investor Trading Profit Formula

Effective from our update on April 5, 2023, we have rebranded from Marginal Investor to The Starter Investor. For additional details, please visit our About Us page.

TRADING PROFITS ARE RECKONED according to the formula suggested by Benjamin Graham, author of the book The Intelligent Investor: The Classic Text on Value Investing.

The use of this equation was illustrated in a previous post entitled Measuring Our Stock Trading Profit. We define trading profit as the difference between the previous total sell price and the new total buy price.

Hence, our stock trading operating cycle starts with our cash position which is then converted into our stock portfolio upon completion of our buying order. Selling our stocks creates receivables. Upon collecting cash from the sale transaction, the operating cycle starts anew when we use the cash collection to pay for our new buying order.

Swing Trading

Swing Trading is, at this time, the primary business activity that drives our stock trading operating cycle, as well as our main profit generator.

Trading Profit Updates

The main goal of our operations is to demonstrate how many trading cycles it will take before we double our money.

We achieve this by generating a trading profit of at least 4,050 pesos based on initial trading capital mentioned in one of my previous posts Awakening of the Marginal Investor or Speculator.

Cycle No.		Date		Shares	Total Buy Price		Total Sell Price		Trading Profit		Profits To Date
		23-Feb-09		20	4,055		-		-		-
		27-Mar-09		20	-		4,414		-		-
1		01-Apr-09		20	4,067		-		347		347
		17-Apr-09		20	-		4,434		-

Last Update: April 26, 2009

This post is updated regularly with the latest completed Stock Trading Operating Cycle.

The BPITrade Settlement Account: BPI Direct Savings Bank

BPI Direct new maintaining average daily balance

The BPITrade announcement

BPI TRADE LOWERED THE MONTHLY MAINTAINING Average Daily Balance of BPITrade settlement account with BPI Direct Savings Bank, says the email advisory it sent out to clients:

--- On Thu, 4/23/09, bpitrade@bpi.com.ph wrote:

From: bpitrade@bpi.com.ph
Subject: BPI Trade Settlement Account
To: Marginal Investor
Date: Thursday, April 23, 2009, 4:12 PM

Dear BPI Trade clients:

Greetings!

Please be informed that the monthly maintaining Average Daily Balance (ADB) of your BPITrade settlement account with BPI Direct Savings Bank has been lowered from P5,000 to P500.00. As a non-ATM deposit account, the BPITrade settlement account will earn interest as follows:

Interest Rates (per annum)
If daily balance is:
PhP 0 - 499 0.000% p.a.
PhP 500 and above 1.750% p.a.

Please visit the FAQs on the BPITrade website for more information.

Thank you.


BPI Trade Team

Visting the BPITrade FAQs

Following the suggestion, we visited the FAQs page on the BPITrade website for more information:

"What is the minimum investment required to open a BPITrade account?

There is no minimum investment required to open a BPITrade account. However, before you can purchase shares of stock, fixed income securities, or mutual funds, you must first deposit funds into your BPITrade Bank Account. The BPITrade bank account ("Settlement Account" maintained with BPI Direct Savings Bank) requires an Average Daily Balance of only PhP 500.00 (emphasis by Marginal Investor)."

 

Good for starter stock traders

This development is a boon to the beginning stock trader. First, it decreases the time required to accumulate sufficient funds for starting your first stock trading operating cycle. Second, it contributes to the much needed liquidity or cash position of the beginning stock market investor.

For those familiar with the game plan proposed in my earlier posts How to Build Equity for Your Speculative Stock Trading and Finding the Money for Investment, we said that for one who saves a minimum of 275 pesos monthly or on the average 2% to 3% of his or her monthly salary or earnings, we need a year to accumulate funds for opening and maintaining a BPI Expressteller Savings Account.

With the lowered monthly maintaining ADB of a BPITrade Bank Account, it would now make sense to open a BPITrade Account in just over a year of saving money, and place our first stock market buy order in under two years of accumulated savings. Third year into our savings program, we are already warming up on the stock trading game, and well on our way to converting our stock trading profits into a more secure investment vehicle like investment funds.

Measuring Our Stock Trading Profit

The Starter Investor Measures Trading Performance

Effective from our update on April 5, 2023, we have rebranded from Marginal Investor to The Starter Investor. For additional details, please visit our About Us page.

KEEPING TAB OF OUR TRADING PROFIT is more about tracking our success in the stock trading game. But how do we measure our accomplishments?

Reinvestment

"In a continuous program" says Benjamin Graham, the author of The Intelligent Investor: The Classic Text on Value Investing, "no market profit is fully realized until the later reinvestment has actually taken place."

Trading profit

In more concrete terms, the "true measure of the trading profit" Graham says in Chapter Two entitled The Investor and Stock-Market Fluctuations, "is the difference between the previous selling level and the new buying level."

For illustration, let us use the completed stock trading operating cycle mentioned in a previous post on  BPITrade Updated Fee Structure:

This shows a trading profit of almost 8 percent based on our previous total sell price. Just maintain similar results in the next 9 to 12 stock trading roundtrips and you are on your way to doubling your money probably.