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.
Yes, you absolutely can. Sometimes this is referred to as scalping. The better question is whether you should. There are a few points to seriously consider. First, trading can seem fun and the opportunity to beat the market (thousands of others) exciting. However, as an independent day trader competing from home, the extremely high likelihood is that you will not win. Remember that you will be competing against the professionals who use the latest technology, co-located servers, and immediate news aggregation services. Even most of them fail. And, when you do get filled, it'll also be likely that an institution may be on the other side. I don't like your chances.
Secondly, the backtested results of your algorithm will be misleading. Backtesting can't exactly mimic the real world market mechanics. The simulator may record you being filled. In reality, you can't be sure that you will pay .770 for the stock, then sell it at .775. Sure, you may have working bids and offers; however even if the market trades at your price you can't be sure that you get filled (might be at the back of the stack), unless the price totally clears. Most importantly, if there really was an edge simply taking half ticks out of this market, competition would have priced it out a long time ago, especially now with high-frequency, low-latency trading. I think that most of the time you'll simply be stuck trying to scratch your position, and usually will end up having to puke (take a loss).
Finally, decades of data, economic theory, and real-world evidence suggest that stock-picking as an investment strategy does not work. Even the professional money managers can't consistently beat the markets, so why try? I get it, it's fun to be part of the game. If you watch the financial news channels it would seem that every day is an opportunity to make profits. If you do trade, make sure it's only with money that you can lose and not have it affect your lifestyle or retirement goals. I also recommend you read a bit about behavioral finance. People tend to have a harder time accepting losses then they do gains, in which case when you trade for real you'll probably hold on to your losers longer, hoping for a comeback, deviating from your strategy. Be aware of this and other biases and try to remain disciplined. If you have any specific questions about trading, please let me know. Good luck.
This is not a realistic strategy. There is a lack of evidence that investors can "day trade" for a consistent profits. You haven't described what you do when you buy and the stock doesn't go up but instead goes down. The commissions, spreads, taxes and market impact would likely erode any trading profit you might make.
The answer to your question is yes! You can buy and sell a stock many times in one day.
The real question that you should be asking is:
Should I buy and sell the same stock many times in one day?
The answer to that question is NO. The reason is that there are people a whole lot smarter than you, with more education than you, with more experience than you, with more capital than you, with better and faster computers than you. Some make money, but many do not.
If you think that a simulator will guarantee you a profit, you may be disapointed to learn that the company marketing the simulator is the only one making any money.
Certainly! It's called day trading of high-frequency trading. The issue isn't the trading but the taxation. If the account is an IRA it doesn't matter at all other than the trading cost. If it is not an IRA or Roth IRA then short term trading does have issues. You can sell at a gain and re-buy anytime but it will be a short term capital gain is loses preferential tax treatment. If you sell at a loss and buy back within 30 days the "loss" is not allowable as a short term loss on your tax return.
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.