Buying shares with money you dont have...

[jono1887]

I've been thinking about this recently. With the T+3 system, all my trades made on a single day are settled at the same time 3 days later.

Say hypothetically, i bought stock $100K of stock XXX on open, and sold an hour later getting $102K, this trade would be settled 3 days later and my account would just be credited 2K right? So what i'm trying to find out is if I could make this trade without having the $100K in the first place - say I only had $20K. I know this is risky, but considering the massive increases during open of alot of resource stocks this week... i think its possible to reap a few K profits.

I do realise the risk involved if the price moved the opposite direction, but is this possible??? :confused:

[jono1887]

* I was going to try this with FMG this morning. So relieved that I didn't... opened at 4.48 and is now 4.20... i would have lost $6k :(

[Timmy]

Has been known to have been done a few times :rolleyes: - depends on your relationship with your broker.

Or you could just trade DMA CFDs using the leverage allowed by the provider.

[Krusty the Klown]

You wouldn't be able to make the initial trade without sufficient available funds in your account would you?

[Krusty the Klown]

Has been known to have been done a few times :rolleyes: - depends on your relationship with your broker.

Can you please post back here if it works Jono? :)

[cutz]

I've been thinking about this recently. With the T+3 system, all my trades made on a single day are settled at the same time 3 days later.

Say hypothetically, i bought stock $100K of stock XXX on open, and sold an hour later getting $102K, this trade would be settled 3 days later and my account would just be credited 2K right? So what i'm trying to find out is if I could make this trade without having the $100K in the first place - say I only had $20K. I know this is risky, but considering the massive increases during open of alot of resource stocks this week... i think its possible to reap a few K profits.

I do realise the risk involved if the price moved the opposite direction, but is this possible??? :confused:

I assume you're with commsec, i think they give you an initial credit limit of 25K.

[jono1887]

You wouldn't be able to make the initial trade without sufficient available funds in your account would you?

Well with comsec you have to accounts, one for settling the trades and the other is the high interest one. So whenever i make a trade, theres actually no money in the settlement account, I transfer it from the high interest one on the settlement date.


Can you please post back here if it works Jono? :)

I dont think i want to try after watching it today... its very risky! especially considering you only have 1 day for it to recover, you dont really have the option to hold it and ride it out.


I assume you're with commsec, i think they give you an initial credit limit of 25K.


yes im with comsec, not sure about this credit limit, the largest trade ive made is only about 24k so its still under if that's the case.

[Prospector]

You cant do it with NAB online. Has saved me a couple of times when I almost used the wrong entity (I trade in 3 different ones)

[jono1887]

You cant do it with NAB online. Has saved me a couple of times when I almost used the wrong entity (I trade in 3 different ones)

what do you mean by 3 entities? 3 different brokers or 3 different names/accounts?

[jono1887]

ok, ive tried it and the order couldn't go through.. i need to place a deposit of some kind if i want to make a trade that large. has anyone been successful doing this with another broker?

[Kez180]

I have done this about 10 times with commsec....

Your purchasing limit is automatically adjusted based on the assets you hold with CBA/Commsec...

It is basically leveraging massively without the loan process... :p

It is really nothing short of gambling... I Did it a couple of times during the OMG days of the credit crisis ie as the USA was voting on the 700 Billion bail out etc...

What I was doing is using the ~$2000 worth of other shares I had as the stop loss value so I was buying about $11,000 of a share at open, or shortly after depending on how the market was looking, I'd be trying to hit over corrections...

Ie the market fell 2% on one day, I put a low order in to buy a couple of shares near close and hope that there was a panic sell at the end of the day.

This worked a couple of times, but it went bad once and I lost all of my collateral, I had forgotten to pull an order I had placed late friday, I only realised it was in market monday at about 2 o'clock... It took me down to about $500 in shares :( the gf banned me after that and I haven't traded since...

[cutz]

ok, ive tried it and the order couldn't go through.. i need to place a deposit of some kind if i want to make a trade that large. has anyone been successful doing this with another broker?

So how big was your attemped trade, >25K ?

[jono1887]

So how big was your attemped trade, >25K ?

100k, with 18k in the account

[Kez180]

So how big was your attemped trade, >25K ?

Lol if you have to trade with money you don't have anything over 25k is a bad idea anyway...

I wonder what they would do if a uni student somehow managed to lose $100,000 with no tangible assets and **** all income...

[jono1887]

This worked a couple of times, but it went bad once and I lost all of my collateral, I had forgotten to pull an order I had placed late friday, I only realised it was in market monday at about 2 o'clock... It took me down to about $500 in shares :( the gf banned me after that and I haven't traded since...

How much over your actual funds were you trading? eg say you had 5k, were you trading 100% more - 10k?

how much did you end up loosing? I was actually thinking of not in between days but just in the first 10 minutes of trading where the large fluctuations happen.

LOL, the gf banned you? sounds like you have an overpower gf :p::p:
unless you blew the funds for your wedding or something....

[MichaelD]

This seems to be a good idea on the surface, but here's the catches;

1. It falls apart if the stock you've just bought goes into a trading halt.
2. It falls apart if you make a trading error (eg forget that the market is closing early today because of a public holiday the next day and thus end up holding an extra day).
3. It falls apart if the trade changes status (eg goes Ex-Dividend)

You then need the full amount of the trade available in your account on T+3 to settle.

I can assure you from extensive experience trading this way that these glitches happen far more often than you think - around about 1 in 30 of my trades are affected in this way.

There are two major differences with my trading, though;
1. I have a positive expectancy trading plan. i.e. I'm not gambling.
2. I have cash stashed away ready to transfer to the trading account in a hurry if needed.

Oh, and from your other comments in this thread - don't confuse brains for a bull market.

[nunthewiser]

hi guys . what a great idea , buying shares with other ppls money

just a quick querie........... what ya gunna do if that stocks goes into a TRADING HALT!.u got the money to cover settlement ?

just trade with your own cash , dont be silly

no offence intended

[cutz]

100k, with 18k in the account

OK,

I'm not surprised, definitely not enough collateral.

In your case i suspect 43K would be your limit but i'm not 100% on this, i don't day trade stocks through commsec.

[jono1887]

Lol if you have to trade with money you don't have anything over 25k is a bad idea anyway...

I wonder what they would do if a uni student somehow managed to lose $100,000 with no tangible assets and **** all income...

its not like the stocks i trade (large cap resources) are gonna go bust or fall over 30% in day so its really the bank thats risking anything, its mostly me and my capital

[nunthewiser]

LOL ...seems micheald had covered it while i was typing .........

as you were

[cutz]

what ya gunna do if that stocks goes into a TRADING HALT!

100K trade, ouch.

[jono1887]

100K trade, ouch.

true... but as we've established, it doesnt work.. comsec didnt let me place the trade in the first place without a deposit of some kind.

[nunthewiser]

true... but as we've established, it doesnt work.. comsec didnt let me place the trade in the first place without a deposit of some kind.


im talking ANY amount ............ if you cant afford to cover it , dont do it ..........

hey but your a grown up .good luck with it ...

[Kez180]

How much over your actual funds were you trading? eg say you had 5k, were you trading 100% more - 10k?

how much did you end up loosing? I was actually thinking of not in between days but just in the first 10 minutes of trading where the large fluctuations happen.

LOL, the gf banned you? sounds like you have an overpower gf :p::p:
unless you blew the funds for your wedding or something....

I sold the car to generate some capital... then I lost that... :o

I had maybe $500 in the bank...

I had $2000 in 3 or 4 different shares all penny dreadfuls... (ZYL,MST,APG were among a few...)

I was buying about 10k-11k at once... if I lost I made up the difference by selling other shares as well...

[cutz]

true... but as we've established, it doesnt work.. comsec didnt let me place the trade in the first place without a deposit of some kind.

We’re talking hypotheticals,

It can happen say if you owned 80K of BHP no cash and tried it with RIO, don’t take offence just tossing ideas around to raise your awareness.

[adobee]

Commonwealth will give you the proportion of money and stocks you hold.. I am not sure of the % but if you ask them they will tell you.. I have had some recent correspondence / fights with them as I have wanted to make large trades quickly but they havent gone through for this reason which has enraged me when I have double the amount in my commbank account.. thus i have now opened a comsec cash account..

If you place the order on the phone they will usually take it..

If you place an order and dont have the funds you are asking for trouble.. As already suggested trading halt large swing etc.. Are you using a stop loss probably not .. and it can get passed.. If you are using large caps and you dont think they can get smashed your wrong and even if this was the case you are looking at what 1-4% returns max.. you would be better focusing on a trade of 10k in small caps on break outs etc..

If there is a trading halt etc and you get caught out the bank will charge you for fraud.. this will go on your criminal record and affect you should you ever plan to be a c.a , doctor, realestate agent, government employee, bank employee etc..

[jono1887]

Commonwealth will give you the proportion of money and stocks you hold.. I am not sure of the % but if you ask them they will tell you.. I have had some recent correspondence / fights with them as I have wanted to make large trades quickly but they havent gone through for this reason which has enraged me when I have double the amount in my commbank account.. thus i have now opened a comsec cash account..

If you place the order on the phone they will usually take it..

If you place an order and dont have the funds you are asking for trouble.. As already suggested trading halt large swing etc.. Are you using a stop loss probably not .. and it can get passed.. If you are using large caps and you dont think they can get smashed your wrong and even if this was the case you are looking at what 1-4% returns max.. you would be better focusing on a trade of 10k in small caps on break outs etc..

If there is a trading halt etc and you get caught out the bank will charge you for fraud.. this will go on your criminal record and affect you should you ever plan to be a c.a , doctor, realestate agent, government employee, bank employee etc..

well considering your making the trades out of money that is not your own... the % returns arent actually measureable - your ****ting out money out of no where if you get what i mean :p:

If there was a trading halt, it wouldnt last more than a week would it? all that would happen is i would get charged the $54 a day dishonour fee and interest on the amount until the halt ends and i can sell the shares.

remember, we are talking hypotheticals here... im not actually going to do it.

[nunthewiser]

If there was a trading halt, it wouldnt last more than a week would it? all that would happen is i would get charged the $54 a day dishonour fee and interest on the amount until the halt ends and i can sell the shares.

remember, we are talking hypotheticals here... im not actually going to do it.


ive seen trading halts turn into suspensions quite regurly actually and they can last YEARS

lol , good luck with it

another name on the asx walls of been and gone would be traders

[MichaelD]

ok, ive tried it and the order couldn't go through.. i need to place a deposit of some kind if i want to make a trade that large. has anyone been successful doing this with another broker?


100k, with 18k in the account


remember, we are talking hypotheticals here... im not actually going to do it.

Erm - you actually DID try to do it. Fortunately Commsec is a more prudent risk manager than you are.

[Chorlton]

Erm - you actually DID try to do it. Fortunately Commsec is a more prudent risk manager than you are.

Well Said..... I second that !!!!

[jono1887]

Commonwealth will give you the proportion of money and stocks you hold.. I am not sure of the % but if you ask them they will tell you.. I have had some recent correspondence / fights with them as I have wanted to make large trades quickly but they havent gone through for this reason which has enraged me when I have double the amount in my commbank account.. thus i have now opened a comsec cash account..

If you place the order on the phone they will usually take it..

If you place an order and dont have the funds you are asking for trouble.. As already suggested trading halt large swing etc.. Are you using a stop loss probably not .. and it can get passed.. If you are using large caps and you dont think they can get smashed your wrong and even if this was the case you are looking at what 1-4% returns max.. you would be better focusing on a trade of 10k in small caps on break outs etc..

If there is a trading halt etc and you get caught out the bank will charge you for fraud.. this will go on your criminal record and affect you should you ever plan to be a c.a , doctor, realestate agent, government employee, bank employee etc..

well considering your making the trades out of money that is not your own... the % returns arent actually measureable - your ****ting out money out of no where if you get what i mean :p:

If there was a trading halt, it wouldnt last more than a week would it? all that would happen is i would get charged the $54 a day dishonour fee and interest on the amount until the halt ends and i can sell the shares.

remember, we are talking hypotheticals here... im not actually going to do it.

[jono1887]

Erm - you actually DID try to do it. Fortunately Commsec is a more prudent risk manager than you are.

I did it at a price which was 20% lower than the market price at the time, there was very little chance that it would hit in the 20 seconds it would take for me to make the order and then cancel it.

[trillionaire#1]

ive done this with commsec ,buying and selling on the same day
they got paid a day late and didnt call me on it.
only problem was the shares went the wrong way and i had to quickly
empty my pockets to make sure i could cover the difference between
my buy/sell price.

note: use your own money , imagine if you bought the shares and that
company goes into an extended trading halt or drops massively in SP
can you find the money in the 3 days......

[nomore4s]

well considering your making the trades out of money that is not your own... the % returns arent actually measureable - your ****ting out money out of no where if you get what i mean :p:

If there was a trading halt, it wouldnt last more than a week would it? all that would happen is i would get charged the $54 a day dishonour fee and interest on the amount until the halt ends and i can sell the shares.

remember, we are talking hypotheticals here... im not actually going to do it.

You seem intent on proving to yourself that it is a good idea.

What happens if share goes into trading halt releases bad news and drops 25%+ on open and Commsec force closes your trade out on open because you haven't paid for it?

IMO you're taking on a lot of risk for not much gain.

[Julia]

You cant do it with NAB online. Has saved me a couple of times when I almost used the wrong entity (I trade in 3 different ones)
I've never actually tried to do it with Etrade but had one instance where I had placed an order on, say, Monday. Tuesday I changed my mind when it hadn't filled, cancelled it and placed a different order. The second order wouldn't go through. I wasn't too worried one way or the other, but it did seem a bit unreasonable and I'd have thought their software would have sorted it out.

[MichaelD]

well considering your making the trades out of money that is not your own... the % returns arent actually measureable - your ****ting out money out of no where if you get what i mean :p:


Oh dear. This shows some of the most spectacularly dangerous ignorance of risk I have ever read.

Want to trade with money that isn't your own? Here's what to do:

1. Develop a positive expectancy trading plan.
2. Once developed, you will be able to determine your maximum drawdown.
3. Double this amount.
4. Place double this amount again into your trading account as your trading float.
5. Trade your plan.

To suggest that the % returns aren't measurable is absolutely incorrect. In your example of 100K trades - you're trading with $100,000. You can work our your % return from there on that $100,000. If you decide you're going to trade 4 positions @ $100K then you're trading with $400,000. It's irrelevant that it's not your money - that's the amount of capital that you're utilizing on leverage.

Note: without a positive expectancy trading plan, trading with other people's money is just a faster way of losing all your money (or even more).

Oh, and trading 1 position with all your capital will also blow your account up.

Risk management + position sizing: learn these or the professionals will rapidly and efficiently take all your money away from you.

[Timmy]

Jono - lots of advice on this thread for you, but perhaps you should be thinking bigger than mere $100,000 trades?

Remember the old axiom: If you owe the bank $1 million and can’t pay, you’re in trouble, but if you owe the bank $1 billion and can’t pay, the bank’s in trouble.

I might make up a new axiom too: Join the financial elite, default.

[nathanblack]

why dont we get other "investors" involved. set up a syndicate where evryone uses there comsec accounts to buy shares with money they dont have. we will guarantee 20% returns, and if the shyte hits the fan, we flee to thailand.

im in if anyones keen to orgainse.

[Kez180]

Lol we could get into some serious market manipulation, can you imagine ASF in its entirety short selling a small cap...

[mrluva]

I got fined by comsec for buying 10k MQG when I didnt have money in account and I couldn't sell same day cos MQG dropped. Still managed to sell and make money next day but comsec fined me $59 for one day late payment.
I don't know what's my buying limit, I do this a lot but its always under 25K.
I wouldn't risk 100K.