Sunday, August 27, 2006

Percentage Symbol Means Accuracy

The best indicator to analysis stock performance is percentage! The absolute change in dollars and cents doesn't make sense in analysis stock trading efficiency.

Investor A who bought Google stock at 300 bucks in the morning and realized his gain when Google stock traded at 310 bucks in the afternoon, get 10 bucks or 3.3% as his investment profit.

Speculator B who bought a penny stock at 60 cents in the morning and realized his gain when the penny stock traded at 70 cents in the afternoon, get 10 cents or 16.6% as his investment return!

A wise investor or speculator should always judge his luck or investment efficiency in term of percentage and not the actual monetary gain!
Speculator B should have nothing to complain for the 10 cents as his investment return! Indeed, he should had realized his gain as soon as possible before the stock traded close to 70 cents! An increment over 10% in the same day is quite ridiculous! There are no financial tools in the market that could give such daily return by investor's standard, except for speculator's standard!

Image how much investor A would had made from the penny stock if he turned out to spend his capital of 300 bucks in the same penny stock as speculator B! Investor A perhaps would had sold out his penny stock at 65 cents (8.3% of investment return), given his investment capital and the gain made. Speculator B might out of luck if all the big boys withdraw from the penny stock at 65 cents (and then most likely that penny stock started to trend south)!

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