What are the most efficient ways to bet on an individual stock beating the market?
tl;dr: Unfortunately, there is little available to the retail investor that fits your description. Institutional investors can use swaps to gain leverage on the above trade.  A bank will build a basket of long MSFT and short SPY and then quote a rate against LIBOR (London Interbank Offered Rate) and a margin requirement.  So at the end of the swap the bank will pay the difference in total return between MSFT and SPY and the investor will pay some amount of cash back.  The nice thing for the investor is that the margin requirement will often be fairly small if their credit is good so the investor can lever the trade up significantly. A retail investor could call up your broker and try to get the above but on the off chance they let you the margin requirement might be higher than just going short the SPY. If you aren't a retail investor, you might be able to do something like be long a 3X tech ETF and short 3X SPY ETF.  If you are very clever you might be able to combine multiple levered tech ETFs to get something like 3X MSFT.  However, I would strongly caution against levered etfs for most retail investors as the fees are high and levered etfs tend to strongly drift away from the index against the investor over anything but the shortest time periods. "You could buy options. I do not know what your time horizon is but it makes all the difference due to theta burn. There are weekly, monthly, quarterly, yearly and even longer duration options called leaps. You have decided how long of a time frame. You also have to see what the implied volatility is for the underlying because if you think hypothetically that the price of the spy is 100 dollars currently. Today is hypothetically a Thursday and you buy a weekly option expiring on Friday ( the next day) of strike 100.5 and the call option is priced at .55 cents and you buy it. This means that the underlying has to move .5 dollars in one day to be considered in the money but at time 0, the option should only be worth its intrinsic value which is the underlying, (Say the SPY moved 55 cents up from 100 to 100.55), (100.55) minus the strike (100.5) = 5 cents, so if you payed 55 cents and one day later at expiration its worth 5 cents ,you lost almost 91% of your money, rather with buying and holding you lose a lot less. The leverage is on a 10x scale typically. That is why timing is so important. Anyone can say x stock is going to go up in the future, but if you know ****when**** you can make a killing if it is not already priced into the market. Another thing you can do is figure out how much MSFT contributes to the SPX movement in terms of points. What does a 1% move in MSFT doto SPX. If you can calculate that and you think you know where MSFT is going, you can just trade the spy options synthetically as if it were microsoft. You could also buy msft stock on margin as a retail investor, but be careful. Like Rhaskett said, look into an etf that has microsoft. The nasdaq has a nasdaq-100 which microsoft is in called the triple Q. The ticker is qqq. PowerShares QQQ™, formerly known as ""QQQ"" or the ""NASDAQ- 100 Index Tracking Stock®"", is an exchange-traded fund based on the Nasdaq-100 Index®. Best of luck and always understand what you are buying before you buy it, JL"
"From what I have read from O'Neil to Van Tharp, etc, etc, no one can pick winners more than 75% of the time regardless of the system they use and most traders consider themselves successful if 60% of the trades are winners and 40% are losers.  So I am on the side that the chart is only a reflection of the past and cannot tell you reliably what will happen in the future. It is difficult to realize this but here is a simple way for you to realize it. If you look at a daily chart and let's say it is 9:30 am at the open and you ask a person to look at the technical indicators, look at the fundamentals and decide the direction of the market by drawing the graph, just for the next hour. He will realize in just a few seconds that he will say to him or her self ""How on earth do you expect me to be able to do that?""  He will realize very quickly that it is impossible to tell the direction of the market and he realizes it would be foolhardy to even try. Because Mickey Mantle hit over 250 every year of his career for the first 15 years it would be a prudent bet to bet that he could do it again over the span of a season, but you would be a fool to try to  guess if the next pitch would be a ball or a strike. You would be correct about 50% of the time and wrong about 50% of the time. You can rely on LARGER PATTERNS OF BEHAVIOR OVER YEARS, but short hourly or even minute by minute prediction is foolish. That is why to be a trader you have to keep on trading and if you keep on trading and cut your losses to 1/2 of your wins you will eventually have a wonderful profit.  But you have to limit your risk on any one trade to 1% of your portfolio.  In that way you will be able to trade at least 100 times.  do the math.  trade a hundred times.  lose 5% and the next bet gain 10%.  Keep on doing it. You will have losses sometimes of 3 or 4 in a row and also wins sometimes of 3 or 4 in a row but overall if you keep on trading even the best traders are generally only ""right"" 60% of the time.  So lets do the math. If you took 100 dollars and make 100 trades and the first trade you made 10% and reinvested the total and the second trade you lost 5% of that and continue that win/loss sequence for 100 trades you would have 1284 dollars minus commissions. That is a 1200% return in one hundred trades.  If you do it in a roth IRA you pay no taxes on the short term gains.  It is not difficult to realize that the stock market DOES TREND. And the easiest way to make 10% quickly is to in general trade 3x leveraged funds or stocks that have at least 3 beta from the general index.  Take any trend up and count the number of days the stock is up and it is usually 66-75% and take any down trend and it is down 66-75% of the days.  So if you bet on the the beginning of a day when the stock was up and if you buy the next day about 66-75% of the time the stock will also be up. So the idea is to realize that 1/3 of the time at least you will cut your losses but 2/3 of the time you will be up then next day as well.  So keep holding the position based on the low of the previous day and as the stock rises to your trend line then tighten the stock to the low of the same day or just take your profit and buy something else.  But losing 1/3 times is just part of ""the unpredictable"" nature of the stock market which is causes simply because there are three types of traders all betting at the same time on the same stock.  Day traders who are trading from 1 to 10 times a day, swing traders trading from 1 day to several weeks and buy and hold investors holding out for long term capital gains. They each have different price targets and time horizons and THAT DIFFERENCE is what makes the market move.  ONE PERSON'S SHORT TERM EXIT PRICE AT A PROFIT IS ANOTHER PERSONS LONG TERM ENTRY POINT and because so many are playing at the same time with different time horizons, stop losses and exit targets it is impossible to draw the price action or volume.  But it is possible to cut your losses and ride your winners and if you keep on doing that you have a very fine return indeed." "The technical term for it is ""timing the market"" and if you can pull it off correctly, you will do quite well. The problem is that it is almost impossible to consistently do well. If it were that easy there would be a lot of billionaires walking around. Even Wall street experts haven't been able to predict the market that well. This idea is almost universally considered a bad idea. Consider this: When has the stock dropped low enough that you are ""buying low"" and let's say you do buy low and it doubles in a month. When do you get out? What if you are wrong and it doubles again? Or if it drops 10% do you keep waiting? This strategy is rife with problems." If you're willing to take on higher risk than a corporate investor (you have to be) and you are smart it's way easier to operate as an individual. Your position/strategy is SO much easier to execute just simply based on trade size, you have relatively no overhead. You won't impact the market at all which is where a heavy hitter might have an advantage, other than that you are in a better position in terms of return vs investment. By coincidence, I entered this position today. Ignore the stock itself, I am not recommending a particular stock, just looking at a strategy. The covered call.  For this stock trading at $7.47, I am able, by selling an in-the-money call to be out of pocket $5.87/sh, and am obliged to let it go for $7.00 a year from now. A 19% return as long as the stock doesn't drop more than 6% over that time. The chart below shows maximum profit, and my loss starts if the stock trades 21% below current price.  The risk is shifted a bit, but in return, I give up potential higher gains. The guy that paid $1.60 could triple his money if the stocks goes to $12, for example. In a flat market, this strategy can provide relatively high returns compared to holding only stocks. You can execute block trades on the options market and get exercised for shares to create a very large position in Energy Transfer Partners LP without moving the stock market. You can then place limit sell orders, after selling directly into the market and keep an overhang of low priced shares (the technical analysis traders won't know what you specifically are doing, and will call this 'resistance'). If you hit nice even numbers (multiples of 5, multiples of 10) with your sell orders, you can exacerbate selling as many market participants will have their own stop loss orders at those numbers, causing other people to sell at lower and lower prices automatically, and simultaneously keep your massive ask in effect. If your position is bigger than the demand then you can keep a stock lower. The secondary market doesn't inherently affect a company in any way. But many companies have borrowed against the price of their shares, and if you get the share price low enough they can get suddenly margin called and be unable to service their existing debt. You will also lose a lot of money doing this, so you can also buy puts along the way or attempt to execute a collar to lower your own losses. The collar strategy is nice because it is unlikely that other traders and analysts will notice what you are doing, since there are calls, puts and share orders involved in creating it. One person may notice the block trade for the calls initially, but nobody will notice it is part of a larger strategy with multiple legs. With the share position, you may also be able to vote on some things, but that solely depends on the conditions of the shares. "The term you're looking for is yield (though it's defined the other way around from your ""payout efficiency"", as dividend / share price, which makes no substantive difference). You're simply saying that you want to buy high-yield shares, which is a common investment strategy. But you have to consider that often a high-yielding share has a reason for the high yield. You probably don't want to buy shares in a company whose current yield is 10% but will go into liquidation next year." "You asked for advice, so I'll offer it.  Trying to time the market is not a great strategy unless you're sitting in front of a Bloomberg terminal all the time. Another person answering your question suggests the use of index funds; he's likely to be right. Look up ""asset allocation.""  What you want to do is decide that you want your portfolio to contain, for example: If one of your stock holdings goes up far enough that you're out of your target asset allocation ranges, sell some of it and buy something  in another asset class,s so you're back in balance.  That way you lock in some profit when things go up, without losing access to potential future profits.  The same applies if something goes down; you buy more of that asset class by selling others. This has worked really well for me for 30+ years." "You can certainly try to do this, but it's risky and very expensive. Consider a simplified example. You buy 1000 shares of ABC at $1.00 each, with the intention of selling them all when the price reaches $1.01. Rinse and repeat, right? You might think the example above will net you a tidy $10 profit. But you have to factor in trade commissions. Most brokerages are going to charge you per trade. Fidelity for example, want $4.95 per trade; that's for both the buying and the selling. So your 1000 shares actually cost you $1004.95, and then when you sell them for $1.01 each, they take their $4.95 fee again, leaving you with a measly $1.10 in profit. Meanwhile, your entire $1000 stake was at risk of never making ANY profit - you may have been unlucky enough to buy at the stock's peak price before a slow (or even fast) decline towards eventual bankruptcy.  The other problem with this is that you need a stock that is both stable and volatile at the same time. You need the volatility to ensure the price keeps swinging between your buy and sell thresholds, over and over again. You need stability to ensure it doesn't move well away from those thresholds altogether. If it doesn't have this weird stable-volatility thing, then you are shooting yourself in the foot by not holding the stock for longer: why sell for $1.01 if it goes up to $1.10 ten minutes later? Why buy for $1.00 when it keeps dropping to $0.95 ten minutes later? Your strategy means you are always taking the smallest possible profit, for the same amount of risk. Another method might be to only trade each stock once, and hope that you never pick a loser. Perhaps look for something that has been steadily climbing in price, buy, make your tiny profit, then move on to the next company. However you still have the risk of buying something at it's peak price and being in for an awfully long wait before you can cash out (if ever). And if all that wasn't enough to put you off, brokerages have special rules for ""frequent traders"" that just make it all the more complicated. Not worth the hassle IMO." You can do some very crafty hedging with the variety of options.  For instance, deep out of the money options are affected more by changes of market volatility, knowing this you can get long or short vega very easily, as opposed to necessarily betting on changes in the underlying asset. Playing the markets is simple...always look for the sucker in the room and outsmart him. Of course if you can't tell who that sucker is it's probably you. If the strategy you described could make you rich, cnbc staff would all be billionaires. There are no shortcuts, do your research and decide on a strategy then stick to it in all weather or until you find a  better one. "I think I understand what you're trying to achieve. You just want to see how it ""feels"" to own a share, right? To go through the process of buying and holding, and eventually selling, be it at a loss or at a gain.  Frankly, my primary advice is: Just do it on paper! Just decide, for whatever reason, which stocks to buy, in what amount, subtract 1% for commissions (I'm intentionally staying on the higher side here), and keep track of the price changes daily.   Instead of doing it on mere paper, some brokers offer you a demo account where you can practice your paper trading in the same way you would use a live account. As far as I know, Interactive Brokers and Saxo Bank offer such demo accounts, go look around on their web pages.  The problem about doing it for real is that many of the better brokers, such as the two I mentioned, have relatively high minimum funding limits. You need to send a few thousand pounds to your brokerage account before you can even use it. Of course, you don't need to invest it all, but still, the cash has to be there.  Especially for some younger and inexperienced investors, this can seduce them to gambling most of their money away. Which is why I would not advise you to actually invest in this way. It will be expensive but if it's just for trying it on one share, use your local principal bank for the trade.  Hope this gets you started!" First, I want to point out that your question contains an assumption. Does anyone make significant money trading low volume stocks?  I'm not sure this is the case - I've never heard of a hedge fund trading in the pink sheets, for example. Second, if your assumption is valid, here are a few ideas how it might work: Accumulate slowly, exit slowly.  This won't work for short-term swings, but if you feel like a low-volume stock will be a longer-term winner, you can accumulate a sizable portion in small enough chunks not to swing the price (and then slowly unwind your position when the price has increased sufficiently). Create additional buyers/sellers.  Your frustration may be one of the reasons low-volume stock is so full of scammers pumping and dumping (read any investing message board to see examples of this).  If you can scare holders of the stock into selling, you can buy significant portions without driving the stock price up.  Similarly, if you can convince people to buy the stock, you can unload without destroying the price.  This is (of course) morally and legally dubious, so I would not recommend this practice. In the UK there are spread betting firms (essentially financial bookmakers) that will take large bets 24x7. Plus, interbank forex is open 24x7 anyway. And there are a wide array of futures markets in different jurisdictions. There are plenty of ways to find organizations who are willing to take the opposite position that you do, day or night, provided that you qualify. I was referring to insider information as a seperate means of profiting. So I assumed:  1. Fundamental analysis/picking the direction 2. Insider information 3. Gaming the market (illiquid markets)  If this is true. What makes a good market maker? Stoploss/takeprofit management and hope there are enough players in it *not* to win it (i.e. hedge positions) to take profit from?  Sounds very luck base or is there something im missing?  Thanks One reason why you may have gotten this advice is that stocks have an expected real return over time, while commodities do not. Therefore, when gambling on individual stocks, odds are in your favor that they will ultimately go up over time. You may do better or worse than the market as a whole, but they will likely go up as the whole market, on average, rises over time. Commodities, on the other hand, have no expected real return. It is more zero-sum. In fact, after costs, a real loss should be expected on average, making gambling in here more risky.