hey what's going on everyone I wanted to make a quick video here to talk a little
bit about a trading technique that allows you to maximize your profits while
still using the same exact trading strategies you're already probably using
to trade and the technique is called position recycling or pretty commonly
just referred to as recycling or recycling shares so I'm gonna talk to
you a little bit about what it is how you can do it and give you some examples
of how much it can actually increase your profitability as opposed to just
doing a basic buy and sell or short and cover type of trade so first and
foremost well you're recycling shares on the long side meaning you're just buying
and selling as opposed to shorting this allows you to profit from the stocks
small price fluctuations rather than just buying and holding through the
overall trend so if we're looking at the example down at the bottom you have a
typical trade and then you have the example of a recycling trade when you're
doing the typical trade you would buy say for example you're just buying a
support down there and stocks as we know don't just go straight up and straight
down they're gonna have pull backs and they're gonna have balances every once
in a while as well so if you're in a typical trade and you're simply trading
the trend and in this case an uptrend you're gonna pull through those pull
backs and eventually sell into some resistance or so when you think the
price is likely to reverse back down or have a stronger pull back then you're
comfortable holding through now the other way that you can actually trade
this and that's gonna be position recycling can actually allow you to
profit from those small pull backs while still holding your main position or your
core position and without having to take on any extra risk either so in this case
you would simply buy down there again at support once your position becomes a
little bit profitable and you're thinking it's gonna start to pull back a
bit you would sell some of your shares not the entire position rebuy those
shares back again once it starts to pull back and dip again sell some of your
shares once it bounces up and so on and so forth and that is really the basic
and really that's the basics of position recycling
now you can also and recycle on the short side of the
spectrum so for those of you who may not know short selling we're just mostly
referred to as shorting is something that allows you to profit from a stock
moving downward okay so just like when you buy and sell you still want to buy
low and sell high but in this case when you're short selling you're gonna sell
high first and then later on you're gonna ideally buy back at a lower price
and still profit the difference between where you bought and where you sort out
so just like when we're buying and selling you can of course still recycle
shares when a stock is down turning and when you're short selling that position
the only difference is instead of buying selling and then re buying you're gonna
short style cover and then reassure and so on and so forth now I want to give a
quick example on the profitability of a typical trade when you're holding
through the pull backs as opposed to a recycled trade when you're buying and
selling more frequently and you're actually taking advantage of those small
pull backs and adding it to your overall profit in your core position now if
we're gonna look at the example down at the bottom that I have drawn up this is
just gonna be a typical trade once again and we're gonna start with buying 1,000
shares at $8 per share and that is represented on the chart at the bottom
of course with the green circle I'm also with the number one then later on we
hold through some pull backs and we see that it starts to top out a little bit
and we decide we want to sell all 1,000 shares at eight dollars and forty cents
giving us a forty cent per share profit on 1,000 shares which of course is a 400
dollar profit on our position okay now moving on to the recycling shares
example so before even diving into this I want to make sure that you realize
these are the exact same charts so if we go back here you can see this is the
same chart as the one that we're gonna recycle the shares on the only
difference is again we're gonna be profiting from the small pullbacks
and trading them more frequently than we would with a typical trade when we're
just buying and holding through the overall trend
now when we're gonna recycle shares we're gonna start off with the exact
same position as we did with the previous example so we're gonna buy
1,000 shares down there are number one which is at $8 per share then what's
gonna happen is the position starts to move in our favor a bit we're up about
15 cents per share and we decide we want to take off some of our position so we
sell half of our shares 500 shares at 8 dollars and 15 cents and that gives us a
profit on that trade of $75 because 500 shares sold at a 15 cent profit is of
course $75 then what happens is the stock starts to pull back a little bit
and we're gonna add those 500 shares that we just sold back on to our
position at eight dollars and ten cents of course
five cents lower than where we just sold now our average is going to be at eight
dollars and five cents okay the reason for that is because since we sold 500
shares from our original position at eight dollars we then only had 500
shares at eight dollars and then once we buy 500 shares back at eight dollars in
10 cents we now have 500 shares at eight dollars
and ten cents and 500 at eight dollars even so half a routine that so halfway
between that is of course eight dollars and five cents making that our average
cost per share on this trade okay then once the stock starts to reverse
back up there are number four we're gonna again sell 500 shares to lock in
some more profits and this time we're gonna take off one hundred dollars in
profits and the reason is because we're selling 500 shares at a 20 cent profit
from our eight dollars and five cents per share position giving us again a
$100 profit and again the stock pulls back with five 500 shares more at eight
dollars and fifteen cents our average is now eight dollars and ten cents and last
but not least we get a final strong move up and we decide we want to sell our
entire position now just to get all the way up and we sell all 1000 at eight
dollars and 40 cents for a 300 dollar profit making our total profit on the
trade $75 plus $100 plus 300 475 dollars as opposed to just holding
through those pull backs and holding through the overall trend where our
profit is only $400 so it's the exact same chart we're starting at the exact
price of $8 and finishing at the exact price of 8 dollars and 40 cents but
because we're taking advantage of those small price fluctuations in the small
pull backs and bounces it's gonna allow us to add an extra 75 dollars in profit
to our overall position into the trade so you may be thinking that might not
sound like too much and it might not sound like it's worth it for the extra
trading that you have to do but you have to keep in mind that this is a very
small-scale example we're only trading 1,000 shares I'm an $8 stock and on top
of that this is an example with pretty low volatility so for example you could
also be trading 1,000 shares of stock at $8 and then instead of selling 500 at a
15 maybe it spikes all the way up to $8.50 and then you rebuy a 25 and then
it goes up to 9 and you sell half there's a lot more volatility often in
the general market than there is in this example so trust me when I say that
learning how to recycle your shares is something that you definitely want to do
and it can add a lot of profitability to your trading once you get the hang of it
now a few things to keep in mind about recycling shares is that because you're
buying and selling so frequently you do need to be able to date rate as much as
you want and have unlimited day trades so if you're somebody that lives in the
United States and you're under the pattern day trader rule really the only
thing I can recommend for you to do if you're looking to start recycling shares
is to of course save up and get yourself over the $25,000 limit to be able to day
trade as much as you'd like or to look into maybe opening an international
trading account which will allow you to legally of course avoid the pattern day
trader rule and again trade as much as you'd like I have one international
broker that I've used and then I actually recommend to a lot of people
link down below in the description so make sure to check that out if you're
interested and looking into an international
account to avoid the pattern day trader