Why is it when my stock has gained in a day and rests above the price I bought it(at closing or within trading), it still shows in my investments as having lost some value although it is now a better price than when I bought it ?
I’m guessing there is some delay and that would be too blame but maybe I’m missing something.
As Ashige said it would be the exhange rates playing their usual tricks.
My first position opened was in Pepsico and so I have seen the account balance hovering around -£15 despite the share value increasing by $1.5~.
If you want to avoid this, my recommendation would be to start off with some local companies where the exchange rate will not be a factor in determining your account balance. the platform does also list 2 different numbers for the going price of a share as well so if possible use the position listing section for any calculations rather than the graph charts final number upon market close.
for reference I got PEP with an average price of $136.51 when the FX was 1.28USD:1GBP. the -£15 was a result of the FX jumping to around 1.34USD:1GBP
when you trade locally, you need only consider the price of the share, however when making foreign transactions you need to consider both share price and the FX rate at the time you plan to open(or close) a position.
Had I any cash at the time I would have gone all in on my PEP position with the exchange rate being almost $1.35:£1 as it would have cost me less than my current position average. That would have turned into further profit if the rate dropped back down. Even though the share was up $1.4 and would have brought my average cost up, the fact it would have cost me less in £GBP meant it was still more profitable than had I waited for the share to drop again after the exchange rate went back down. This is something you don’t see in local companies, a chance to buy at a good price whether the share price itself has moved or not.
something else to look out for when investing for medium to long term compared to trading will be the dividends as these will also adjust by the FX rate, including the addition of foreign investor taxes.
Another downside is that this requires you to research not only the company you are interested in but also the global trade news that could affect what FX rate your position will open/close at. So if you don’t want to spend all your time researching more and more things, it may be much simpler and safer to stay local and within your zone of comfort.
Stupid question time folks!
Im only using virtual currency to try to learn without burning my fingers, but I see the same thing when holding a stock.
I hadn’t thought of the £/$/€ swing, but is the cost/commission of the transaction also an issue?
So you need the value of the stock to rise by say 0.5% (or whatever the commission is) to cover the cost of the purchase/sale before you start seeing your numbers back in the green?
Also there is a price difference between what the stock is being bought/sold at which has a margin which also needs to be taken into account?
If so that means we need to factor in FX/buy/sell/and commission costs?
Merry Christmas meantime folks!
EDIT: ok showing up my excruciating noobnsss on here, but having read further on CFD trading imI have a slightly better understanding. This slide show was very help (if not allowed here please let me know and ill remove the link):
First thing to look at is the commission/cost, and all fees associated with opening the position. For example, If I buy from the London Stock Exchange, as someone living in the UK I need not worry about the FX rate, but I will incur a stamp duty fee. I believe they take this charge from your portfolio balance separate to your position cost and so while it won’t display in the position value as a cause of opening in the red, it will lower the value of your portfolio since it took from your free cash balance.
The next thing to consider is FX rates when buying foreign shares. My local currency is £GBP, but it needs to be converted to £USD if I want to buy a share of a company or fund on the NASDAQ or New York Stock Exchange. This exchange will be static during market hours so expect to see your price bounce up and down a little before confirming your open/close of position even if the share itself is flat. If the rate is $1.29:£1 I can buy at a cost today which will differ from tomorrow if the FX rate goes to $1.28:£1 or $1.30:£1. depending on the global economy you can end up seeing the live conversion of your foreign shares go up in the green or down in the red, without the share price changing.
Finally is the price of opening the position. it will cost more to buy than to sell, and if you close the position straight away, you will be in the red and have lost money no matter which direction your position was. So unless there is a high volatility, expect to sit in the red for a while until the markets have had time to move in a particular direction.
opening a buy/sell position:
Sell price - Buy price = Profit (you want this to always be positive)
Naturally, you always want to buy your shares for less than you will receive upon selling them.
It boils down to just 2 things after the initial transaction to open a position. The FX rate (where applicable) and the share price compared to what you opened at. As long as one or both move in your favour expect to leave the red and enter the green. if both move, you need less change than if only 1 of them were to move, but due to volatility or world economy you can expect to see your portfolio see exaggerated gains or losses between market sessions (particularly over the weekend). This gap can work either in your favour or against you depending on your luck and order type with open orders.