MARGIN

Consider this, if you bought a stock and set a 5% stop loss on it, and you are buying it on margin, instead of losing 5% of your capital, you now could lose 20% of it. Here is a real dollars and cents demonstration of how this can happen. (Commissions are not going to be figured into this demonstration)

Cash Account: You buy 100 shares of XYZ @ $10 = $1000.00 capital. You set a 5% stop at $9.50. The price falls and you get stopped out. 100 shares @ $9.50 = $950.00 of capital remaining.

2X Margin Account: You are going to use that same $1000 to buy XYZ, but with your margin, you can buy twice as much. You buy 200 shares of XYZ @ $10. You put up $1000 of your capital, and your broker matches that with $1000 of margin for the total purchase price of $2000.00 You set the same stop, and it gets hit. So there is $1900 from the sale of the 200 shares, FIRST you have to pay back the $1000 of margin to your broker, that leaves you $900 of your capital remaining. You started with $1000 of your capital, and now only have $900 left, that is a 10% loss of YOUR MONEY!

4X Margin Account: You can now buy 400 shares of XYZ @ 10, you still put up the same $1000 of your capital, and your broker puts up the remaining $3000. Same stop is used. When it is hit, the first thing you have to do out of the $3800 you get from selling 400 shares of XYZ @ $9.50, is to pay back the $3000 to your broker, that leaves you $800 out of the $1000 that you started with. That is a 20% loss of YOUR MONEY!

And another bad aspect to this, is now you only have $800 left, so with 4X margin your buying power is down from $4000 to $3200, so you can not even buy the 400 shares of XYZ back unless it falls to $8. So not only does the 4X take away more of your capital on a "small" loss, but it also drastically reduces your buying power.



00K

Good luck trading...


The email address is provided only as a courtesy to those readers who want to express their comments...

EMAIL- hotspotcharting-ook@yahoo.com

HOT SPOT CHARTING...

(Click charts to enlarge)

DEIX, Ending wedge potential.
RSI oversold and positive MACD divergence...


SYKE, Potential bullish pennant formation. Positive money flow.
Closed above the 50ma on a day the indexes were in the red...


SPSN, Ground floor opportunity? Back to it's ipo.
Positive MACD divergence and the STO is oversold...


NLST, Is also back to it's ipo.
Positive RSI and MACD divergence...


GRAN, 200ma held and it's trading at the
bottom of it's multi-month channel...


COGT, RSI could be overbought but MACD went positive.
Potential bullish flag developing...

Charts and comments are NEVER INTENDED AS ADVICE...

"Remember, never meet a margin call, and never average losses."

~Jesse Livermore

Thanks for visiting...

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The email address is provided only as a courtesy to those readers who want to express their comments...

EMAIL- hotspotcharting-ook@yahoo.com

BULLSEYE...

QQQQ target hit & it now sits in the neutral weekly zone....



Originally blogged February 27th...




Thanks for visiting...

00K


The email address is provided only as a courtesy to those readers who want to express their comments...

EMAIL- hotspotcharting-ook@yahoo.com

MARCH SCANDAL (NYSE)

(Click charts to enlarge)

Could there be a date with the neckline around the first week of April?

The S&P 500 O-Strip Index is a subset of the S&P 500 index.
It is the S&P 500 stocks that are listed on NASDAQ, which
amounts to approximately 75 NASDAQ traded stocks.



The SEC has opened an inquiry into the NYSE meltdown during the last hour of trading on Tuesday. This could cause a scandal that coincides with the beginning of a bear market...........

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00K


The email address is provided only as a courtesy to those readers who want to express their comments...

EMAIL- hotspotcharting-ook@yahoo.com

HOT SPOT CHARTING...

(Click charts to enlarge)

Lots of potential for the Nasdaq to form a diamond top formation*

*The above diamond pattern is an example and trend lines are only speculative...

Charts and comments are NEVER INTENDED AS ADVICE...

Thanks for visiting...

00K


The email address is provided only as a courtesy to those readers who want to express their comments...

EMAIL- hotspotcharting-ook@yahoo.com

HOT SPOT CHARTING...

QQQQ, We could see a push upwards from the target area


before a possible final capitulation............





Both QID & MZZ featured charts had an amazing day!!!




Charts and comments are NEVER INTENDED AS ADVICE...





"In the middle of difficulty lies opportunity."


--Albert Einstein

Good luck trading...





00K


The email address is provided only as a courtesy to those readers who want to express their comments...

EMAIL- hotspotcharting-ook@yahoo.com