Trading Tips

Trading provides an opportunity to increase your income.

Example value table

No. of units held	Marginal value	Total value
1	$10	$10
2	$9	$19
3	$8	$27
4	$7	$34
5	$6	$40
6	$5	$45
7	$4	$49
8	$3	$52
9	$2	$54
10	$1	$55
11+	$0	$55

You will begin each period with five units. In this example, a sixth unit would be worth $5 to you. Therefore if you can buy an extra unit for less than $5 you will make a profit.

For instance if you buy a unit for $3, at the end of the period you will hold six units worth a total of $45. Your earnings for this period will be $45 minus the $3 you paid for the extra unit, a total of $42. This is more than the $40 you would receive if you did not trade. You now hold six units. If you have another opportunity to buy an extra unit for $3 you should do so, as a seventh unit will earn you $4. You would now hold a total of seven units, and at the end of the period you would earn $43 ($49 for seven units, minus the cost of buying two extra units for $3 each).

Alternatively you may sell some or all of your units. Your fifth unit is worth $6 to you, so if you can sell it for more than this you will make a profit. For instance if you can sell units for $8, then you should sell two units, as your fourth and fifth units are worth only $7 and $6 to you. You will have three units left, which will earn you $27 at the end of the period. You will also earn $16 for selling two units at $8 each, giving you a total of $43 for the period.

You buy or sell units one at a time. You can buy or sell each one at a different price. For instance in this example, you may first sell one unit for $7, and then seek a higher price for the next one.

When you have read the above, please proceed to the next page.

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Last Modified: 18 October 2007