Today’s topic is for adrenaline seekers. For high return seekers. We will talk about balancing risks in picking individual stocks, IPOs, and cryptocurrencies.
🌚 How to earn money fast?
On the Internet you see a lot of ads of successful traders with stock recommendations, options trading strategies, and online courses.. Trading strategies are based on buying stocks at the right moment and selling them later after some time. Usually, periods are very short: from hours to several days. Not all of them are effective, but the simplest and fundamental ones were described in one of the previous letters devoted to technical analysis.
You buy stocks when you see big dips and expect them to jump high back. This strategy works and you can find such stocks in our section “Momentum Stocks” but you should always measure the risk you’re taking.
For example, a stock costs $93 at the moment. Based on the chart the local minimum is at $90, we suppose that price might fall until 90 and have support there. Thus, the potential risk is $3. But it’s also possible that it doesn't fall and start growing. The local maximum is $100, so the potential upside is $7 ($100-$93).
The risk/profit ratio is 3/7. It means that for each dollar you risk, you can earn 2.3 dollars of reward. Usually, the more risk you’re taking, the more profit you can make. The optimal rate is ⅓.
It is most important for speculative trades. So that next time if you see a falling stock and you consider buying it, measure the risk/profit ratio.
For example, this case is not the best to invest in at the moment. Because you can earn as much money as you lose.
This one is the best because you are already at the lowest point.
2. Buy IPOs (Initial Public Offering)
It’s when a company goes public and starts selling its stocks. Most times, companies are cheaper in the beginning and become more expensive as time goes by. At the IPO Amazon’s shares cost $18 in 1997, now their price is over $3000.
But if we talk about short-term gains, there is a pattern we see at IPOs. Stock prices jump the first day, then fall a bit and around 2-3 weeks start growing again.
See the 4-month chart of Airbnb
If you had held the stock for 10 days from the beginning, you would have had +17%. If you had held it for 3 months, you would have had 50%.
Or use another pattern to speculate within a day. Look at the chart of the first day after the IPO of Snowflake.
It’s unlikely that you bought the company right at the beginning because there are already a lot of bids. But you could have bought it a little later (1) and sold it that day at point 2. Then you would have around 12% in just one day!
If you think I found a rare example to persuade you, that’s not true. It’s a very common pattern in many IPOs. Here’s one of the more recent examples — Coursera IPO. The price went +36% in 3 days.
Find the recent IPOs in Gainy and see which companies have gone public. You can become an early investor in them.
IPOs are a real working tool but they don’t give you a 100% guarantee. Most of the time they grow, but there are always exceptions, otherwise the market would be too predictable.
That’s why our analysts have checked all of them and made professional comments in Gainy on prospects of the company to help you make up your mind.
One thing. If you invest in IPOs, don’t do it with all your money, ok? Don’t forget about rebalancing positions.
3. Cryptocurrencies as another way to earn money fast
Regular volatility of cryptocoins can be as much as 5-10% a day. And in the long run it could be x5, x10, x20. Disclaimer: very high risk to lose money, so choose reliable trading platforms and invest little money.
There are 2 ways to start: hard and easy.
The hard way is to learn more about technical analysis so that you understand the drawing below (1). The easy way is to buy top-10 coins and hold them. The volatility and diversification will do the rest for you. You just need to check the portfolio from time to time and sell coins that grew (2).
Don’t be put off by the prices of cryptocurrencies, you can buy fractions as little as you like. So you can buy 100 different coins at 1 dollar each.
I would also mention that the easiest and safest way is to use Gainy recommendations but we are in the process of development and adding crypto. In Gainy we want to cover all financial assets and give you the best recommendations.
Although this is the end of the basic course, I’m not saying goodbye to you. I really enjoyed sharing important principles of investing with you and I hope you understand the stock market better now!
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