The answer to this question can change depending on who you ask. For example, if you hear a trader say he makes 15 to 20 percent, it’s usually about right. If you hear someone say it’s closer to a 60 percent to 70 percent return, it’s a little more optimistic. A trader who makes 50 percent to 60 percent can be a pretty good trader as well, but only if he can pick and choose his trades. One of his goals is to make his profits by buying the next most expensive stock for a profit — or not buying a stock at all. His other goal is to avoid buying stocks where people are doing pretty well. In either case, he has to get his timing right.
So, how does one calculate the value of a stock? The simplest calculation is to use the closing price of the stock. In these circumstances, it’s just a number. If a trader’s average closing price for a particular company is less than the price at which it closed for the preceding 30 days, the investment is probably worthless.
On the other hand, if it closes at a higher average price — for example, a premium over the closing price of the prior month — the trader’s investment could be worth the initial cost of the initial equity exposure. It’s a little different.
“It is generally more useful to examine the stock’s relative performance in the last 12 months.”
If, for example, the top 10 stocks in the S&P 500 and the 100 largest companies on the S&P 500 are both trading at $15,000 a share, and the average price of the 100 largest stocks is $10,000, then the value of the stock is equal to the sum of the 200 times the price of the 100 largest stocks. The difference is your initial equity investments — the difference between the price in the stock you’re considering buying and the lowest price the stock has traded relative to its closing (in this example, $15,000).
“The value of a stock is just an estimate based on historical patterns.”
This is just a rough estimate, since we don’t know exactly what the market will do when a stock crashes. The value of a stock is just an estimate based on historical patterns. For example, during last year’s bear market, stocks traded at a premium to the prevailing market price. This means a 10 percent swing in price (from $20,000 to $25,000) increased the value of stock by 10 percent. By using