I.1. What is the trade? Your first trading operation on a specific example.
The essence of trading, dear reader, is a simple action: a person who wants to sell (Seller) declares his desire by placing an application for sale at a certain price or under a condition relative to the desired price level. There may be quite a lot of such sellers and their offers will differ in price. In consideration, we will limit ourselves to the case that the price does not depend on the characteristics of the product, but is determined purely by the circumstances of the sale. The bids submitted by sellers can be seen by Buyers who, after studying all available sales offers, can submit a purchase request. The purchase price can be very different and, again, depends on the specific circumstances at the current time. So, if the buyer sees that over the last time interval, which he considers significant, the price increases significantly, he can make a decision to buy at the market price and puts out an appropriate application. In this case, the broker will approve the transaction at the nearest price of the Seller who has put up for sale a sufficient amount of “goods”. Imagine a situation when a buyer wants to urgently buy 9 units of goods at the market price. He puts out a market bid at a time when the offers for sale are similar to the example in Table 1.
Table1. Offer for sale.
|Seller||Price, rub.||Quantity, units|
In this case, the broker will make a deal at the request of the Buyer as follows:
1 unit for 10 rubles.
1 unit for 10.51 rubles.
5 units for 10.55 rubles .
2 units of 10.6 rubles .
Thus, the Buyer will purchase 9 units of goods at an average price:
(10+10.51+5*10.55+2*10.6)/9 = 10.49556 rubles.
Since in this case the Buyer has made 4 transactions, then for each transaction he must pay a commission to the broker from the transaction volume. So let’s assume that the broker’s commission rate is 0.0375%, but not less than 41 rubles from the transaction volume (FINAM JSC). I.e. according to Table 2:
Table 2. Calculation of the broker’s commission
|Transaction volume, rub.||Broker’s interest rate, %||Broker’s commission for calculating the rate, RUB.||The final price of the transaction according to the broker’s condition, rub.|
|5*10.55 = 52.75||0,0375||0.019781||41|
|2*10.6 = 21,2||0,0375||0,00795||41|
As a result, such a transaction will cost the Buyer with a Broker’s commission of 164 rubles. Not the best way to make money on the stock exchange…
According to Table 1, our Buyer could make a smarter move by buying 9 units of goods at a price of 10.61, while making only 1 transaction and paying 41 rubles to the broker, instead of 164 rubles.
Dear reader, undoubtedly drew attention to this interesting feature, which is that the minimum transaction to save on the broker’s commission should be made in the amount of:
41/0.0375% = 109333.3 rubles.
In this case, 41 rubles. in fact, it will be equal to 0.0375% of the broker’s rate.
Further, let’s assume that our Buyer, emboldened, already buys 1000 units of goods at a price of 10.5 rubles apiece in one transaction and pays a commission to the broker:
(1000*10.5)*0,0375% = 3,9375 rub. and taking into account the broker’s conditions again 41 rub.
Suppose then the price and volumes begin to grow and reach the level of 10.71 rubles. The buyer has a need to sell the entire batch of goods or part of it. To do this, he needs to submit an application for sale and this time become a Seller.
Table 3. Purchase offers.
|Buyer||Price, RUB.||Quantity, units|
Suppose that according to the scenario in Table 3, there is just a suitable buyer 2. Our Seller sells him 1000 units of his goods for 10.71 rubles. and makes a profit:
(10.71 – 10.5)*1000 = 210 rub, but taking into account the broker’s commission, we get:
10.71*1000*0,0375 % = 4,01625 rubles, i.e. again 41 rubles and further
210 – 2*41 = 128 rubles .
Hooray, here’s our first profit! It remains to pay taxes (for Russia it is 13%) and you can withdraw the legally earned 128 * 0.87 = 111.36 rubles. to your card or to collect money in cash at the broker’s cash desk.
As you can see, everything is quite simple! Not a bad start, isn’t it? We have already earned 111.36 rubles.