Can I buy and sell the same stock many times in one day?
I live in California and have never invested in the stock market and have only used simulators. I figured out a method that basically insured me a profit because I am buying a stock and then selling it as soon as it rises, and buying it again for a low price. For example, I buy a stock at $0.770, and then in the next ten minutes it jumps to $0.775, and I sell all my stocks. In another ten minutes it is back at $0.770, so I buy, and repeat.
On the simulator, I have used this method and could make about 10 percent profit a day. For the real stock market, I was wondering if this was possible, legal, and if this has a name.
This is how day-traders make money, doing exactly this! Most brokerage platforms will charge you a fee per trade however, usually around $5 or more. So unless you are using extremely large sums of money, this type of transaction does not make sense for your average investor. This will also come with a lot of tax reporting.
Do the math on investing $100,000. You buy about 129,870 shares with $100k at 0.77 per share. Sell those shares at 0.775, you make about $648 of profit (which doesn't include costs of trade). Less than 1%. Is it worth the risk, transaction cost, time, stress, reporting etc?
Yes, possible and legal. However, please note, this absolutely does not insure you a profit. First, there is no guarantee that the stock will go up after you buy it. What if it goes down instead? Also, there is a "bid-ask" spread on stocks, especially smaller thinly traded stocks, so at any given time, if you were to buy and sell a stock at the same time (or sell very soon after buying), you would pay a higher price for buying then you would receive for selling. (This is how "Market Makers" earn their money.) Finally, it is likely you will pay a commission each time you trade (or some type of fee), so you have to earn money above this commission/fee to have a gain. So, for your strategy to work, the stock must rise and it must rise by enough to cover the bid-ask spread and the commission/fee. And, yes, there is a name for this. It is called "Day-Trading" and is almost a guaranteed failure for the average non-institutional investor.
You can buy and sell the same stock any number of times; it’s called trading. I would caution you that simulations and real life are not the same. In real life there are transaction costs which erode profits. In real life there are bid and ask spreads, and they are usually much bigger than fractions of a penny. And in real life stocks don’t conveniently go up and down, giving you riskless opportunities to make a profit. I suspect that the only one who will profit from your interest is the company selling you the trading strategy.
This is known as day trading. It is totally legal but foolish since the market is essentially pseudorandom in the short run and cannot be accurately forecast. The only way you can make money investing is in the long run when irrationally emotional behavior will eventually be resolved--but sometimes not for several months and other times not for several years.
It is called day trading and it is legal. Remember that you usually have to pay someone trading fees so the profit needs to be calculated minus the trading cost. Some discount brokerage firms will charge a flat $4 to $6 per trade. So in your example you would pay $5 for the Sell and $5 for the buy back. So you got to make enough to cover the $10 trading costs.
Studies have shown that day trading does not work for long-term financial goals.