Learning - Selling and Buying Back

First Time Investing šŸ£
#1

Hi All,

As this is all new to me I wanted to run this past you to see if it makes sense.

Is there any benefit to Selling and Buying back or am I just losing on the spread (difference between the Sell rate & the Buy rate), example:

I buy 100 shares of KYJ @ Ā£55 each. Total outlay Ā£5500 for 100 shares
The price rises and and it then looks like it will drop because a of shooting star indicator.
I sell 100 shares @ Ā£60 each. Total income Ā£6000 (Profit Ā£500)
The price does drop and I buy back the shares @ Ā£53. Total outlay Ā£5300 for 100 shares.
Does this mean I just made another Ā£200 as I originally had 100 shares for Ā£5500 but now have the same for Ā£5300, it doesnā€™t does it, itā€™s just freeing up cashflow right, itā€™s not actual profit is it?
So now the shares rise again to Ā£59 and I close making another profit of Ā£600

If I had just kept the shares from the original purchase and not done the sell and buy back thing then I would have only made Ā£400 right (Ā£59-Ā£55 x 100 shares = Ā£400)

Maybe by writing it down I can see the answer that I have in fact made Ā£1100 which is much more than just hanging on to the shares over a longer period, but still good to get some views on this and if it works in reality.

Thanks
K

#2

In principle, yes it works.

In reality, however, most people lose money trading like this. If it is that easy to look at a chart and know when a share is going to go up and down - then weā€™d all be millionaires.

The best advice I can give is buy and hold and donā€™t try timing the market. It always ends in tears.

Oh and its capital gain you make, not income.

6 Likes
#3

If you do, make sure itā€™s inside a tax wrapper. Otherwise look up ā€˜bed and breakfastingā€™ which can become accounting hell if you have to account for CGT.

#4

Also remember stamp duty on most UK stocks, so youā€™d lose 0.5% on each trade, or FX rates on US stocks. But yes, in theory youā€™re right.

#5

Thought I read the other day that thereā€™s a Ā£12k personal allowance for GCT or is this refering to something else? Gonna google B&B now. Ta

#6

Yeah I wondered about the 0.5% when I made my purchase the other night. I couldnā€™t see it on the share certificate (or whatever it is called). I did reach out the Freetrade Contact us but appreciate theyā€™re very busy. Probably a good idea to ask those questions here:

Is the 0.5% just on UK stocks not US? Or is it on the sale not the purchase? I bought NIO listed on the NYSE.

#7

Itā€™s not levied on AIM stocks, only on main market UK stocks.

#8

Well, yes, what you describe will work if your guesses about the future direction of the stock price are correct. But thatā€™s a big ā€˜ifā€™! You have to be able to ride the price of a stock up, jump off at the top, wait for it to drop, know when to get back on, and repeat the cycle every time. Frankly, I just donā€™t believe you can know short-term movements in advance accurately enough to make it work.

The reason buy-and-hold usually works is that over the long term (years), the market overall does on average move up-and-to-the-right. Betting on shorter-term fluctuations within the overall trend means taking increasing risks that a stock might not behave in the way you think it will. (And even buy-and-hold wonā€™t always work, there are crashes and there are periods when prices slide sideways without going up or downā€¦ there are no guarantees in the stock market, and that definitely includes the technical analysts telling you about shooting stars!)

Also, youā€™ll usually lose a bit to ā€˜frictionā€™ on every trade. Even if you pay Ā£0 commission as you do at Freetrade, you will still lose out on the buy-sell spread (the price you think of as the share price is usually a mid-price, in reality you normally pay slightly more when buying and receive slightly less when selling than you think you will) and possibly pay foreign exchange fees or stamp duty tax.

#9

@Lemmy Ah! just read about B&Bing, think I better start a different thread after I do a search on the forum. Cheers for that.

#10

The 0.5% stamp duty is on most UK stocks. Thereā€™s no equivalent on US stocks. No idea on other countriesā€™ stocks; we will have to learn as we go along. It is levied on the buyer, not the seller.

There is none on funds, but some funds have a transaction fee (also paid at the time you buy).

#11

Although there is a 0.45% forex charge when you buy and when you sell.

#12

I did see the FX charge, but itā€™s good to know I wonā€™t be paying the 0.5% UK stamp duty at the point of sale. Thanks.