Stock Market vs Cryptocurrency — Trading volatile stocks on Robinhood
So over the past month, I’ve spent a lot of time on crypto, and i think the early gains of the 2016 era are coming to an end. Countries are beginning to recognize that ICOs are a scam, and governments are warning people that investing in crypto is dangerous and they should be cautious. In addition, you have major players like China outright banning ICOs and CEOs of companies like JP Morgan stating that Bitcoin has no value. What is ironic is that despite all of this, Bitcoin continues to surge and recently hit its $6k mark. What’s even more interesting is that despite many of the big banks constantly warning about crypto, they now have division within their own company for crypto analysts despite forecasting no future for this… interesting isn’t it?
What’s sad for me is that many people that were in the community knew what they were getting into with ICOs. Someone makes a new coin that addresses a new market (yeah right… most of these don’t end up doing anything), raising a few million dollars, and then let’s the ICO scene explode and create a large market cap for the coin. Eventually, the coins are dumped and the price goes back to nothing or stabilizes. Most people are happy, but then the government decided to start regulating all this. As more people that are investing in stocks have seen tremendous growth in crypto, they are curious about what the coin market has to offer. As crypto becomes more popular, we except more regulations to be held and the market growth to slow down. In the past few months, I’ve seen steady cycles of 10–15% growth and declines in most coins and have been happy with what I’ve made but the dream of making 10x returns over a short span is becoming more unrealistic.
After spending a bunch of time on forums trading coins, I decided I should expand to stocks. Most of the major stocks are pretty boring for me. I’ve a grad student and investing a few thousand with a few percent gains over the year, or a lucky 10% increase would be good if I had a lot more money. But with a $1000, that just isn’t worth it if I’m spending time actively learning about the market and trying to actually make money.
I began eyeing Robinhood for a while, and I have very mixed feelings about the app itself. The pros: free, easy to use, mobile. Cons: freezes a LOT and have to restart my phone, lags behind market and this is a huge problem for volatile stocks if orders don’t go through, long wait between transferring money into account and having buying power, and very limited options on the types of funds and stuff you can buy. Robinhood recently banned buying options/warrants since users were getting confused between warrants and the actual stock ticker! (I actually emailed them about this, since this is the user’s fault and why make the app even more limited??)
So I got into this because a month ago, I saw everyone posting about buying BAC+B. I had no idea what that was and never saw a “+” sign on a ticker (yeah, I’m super ignorant to the market). I decided to just buy it immediately without reading much into it and I have no idea why I was so spontaneous. There were many online forum posts supporting it, and it turned out to be a warrant for Bank of America. I did my research AFTER buying it and realized a warrant was a private option and not a stuck. I checked robinhood that day and the warrant was in the red and I started freaking out. However, everyone said that the Fed’s interest rates and with the earning reports coming out for Bank of America it was better to have iron hands and hold. For some reason, I believed them and doubled down to cost average my stock price and I’m super glad I did. So, Bank of America’s stock price has to reach ~30 by Oct 2018 for the warrant strike price to be met. I have a good feeling that this will be possible and I obviously will be selling the warrants rather than buying stocks but this was great news. After the earnings report, BAC+B skyrocketed and has given a large chunk of money to play with. With warrant trading discontinued on Robinhood I am super upset since I had a really good run with this but they replied they won’t reinstate them :(
Luckily, the first investment (actually my first investment was MU but I sold after a decent profit) was very strong, so I could afford to start investing in more risky stocks. With a safety net, I began to transfer more and have been looking at the tech sector since I am more familiar with some of the companies, but also some random ones that people constantly are excited to talk about online. This is probably a horrible strategy, but it’s been working so far and was a good learning experience for me to understand the fundamentals of trading. I’m beginning to see some patterns of when to buy/sell and how reactionary some stocks are to earnings reports.
Based on these patterns, I’m hoping to develop some type of software that can read in the history of the stock, compare it to the current market, and give me a prediction of whether to buy or sit on a stock. There are so many that I don’t have the time to focus on watching patterns for each of them. The main things I look at currently are an increase in trading volume that is substantial compared to the previous weeks, alltime high/low, and if the stock has already surged. I avoid any stocks that have seen a recent surge, and like stocks that have seen a dip. Most stocks that dip recover, and most that surge have a correction. An increase in trading volume indicates there’s going to be a movement. Whether it’s up or down is hard to say until we get to hindsight.
For example, I just bought AMD on the dip (hopefully it is leveling out and still not going down!), and despite a strong earnings report compared to all other tech stocks, it has saw a 13% dip. Why? Because earnings expectations were high are what all the current news articles read. But this is just hindsight, and the entire market took a huge hit yesterday so I am pretty hopefully this will recover. Either way, I’m beginning to like stocks more than crypto since there is atleast some substance attached to them. I still will be riding the cycles off XRP as it moves between 15–25 cents constantly, and the support/resistance levels in exchange with BTC are becoming easier to read.
I was a completely noob on crypto when I started at the end of July and feel “educated” about it. I still feel like I don’t really know what to look for in stocks yet, and I hate relying on news articles since most are speculation or hindsight driven, so I still have a lot of work to do here. And since there are actually reports, products, and revenues for companies it becomes more complicated than looking at a chart for a coin and predicting the movement correctly. Either way, I’m super happy I got into investing recently and can’t wait until I have more money to spend on this.