If that’s how y’all are calculating when declaring your taxes most of y’all are going to jail.
1/ You have 60 money and buy a goat. Now you have 0 money and 1 goat.
2/ You sell the goat for 70. Now you have 70 money and 0 goat.
3/ You buy the goat back for 80. Now you are 10 money in debt and have 1 goat.
4/ You sell the goat for 90. Now you have 80 money and 0 goat. Total profit: 20 money.
In addition to that: Learn about the concept of opportunity cost. You made 20 profit on an asset that gained 30 in value. Your trades where bad.
This is actually a fun math paradox. If the investor begins with $70 or more dollars, then he makes 20 dollars profit because he doesn’t have to borrow any money in order to do the second investment, that is, they are two separate investments. If the investor begins with $60 then he makes $10 profit because he has to borrow $10 to realize the 2nd investment.
From a strictly mathematically standpoint, it is $20 profit even if he starts out with $60, however, in the real world, if he starts with $60 and makes $10 profit so now he has $70, he can NOT realize the next investment without borrowing $10… But if he starts with $70 then he has enough to invest without borrowing and thus he makes the $20 profit… You can do this in Excel, it works out
