RC365 Holding Shares Up 100% In Two Days – What’s Happening?

RC365 (LON: RCGH) shares are a useful illustration of an old stock market point, some shares are for trading, and others are not. That is, we need to make a distinction between trading shares and investing in them. Or, as an easy way of distinguishing the two activities, are we in this for the long haul or are we trying to dart in and out to take advantage of short-term price movements.

A 100% price movement would seem to be a useful part of any trading strategy, of course, but this isn’t quite and wholly so. In RC365 shares, after this 100% rise, a trader – one dipping in and out of the stock – would only be flat, not even in profit yet. This makes RC365 a share perhaps for investment but not for trading.

We’ve talked about RC365 Holdings before here. They’re a new addition to the London markets and are a fintech company based out East, in Hong Kong and China. One part of the business is as part of the payments stack, providing payment gateway solutions. The other is IT support and security services. The aim of the London float was to both raise capital to address the European markets and also to raise visibility here.

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Nothing wrong with either the business or the ambitions. It’s entirely possible that this will become a good investment over time. But whether it does or not will depend upon the long-term growth and viability of the business activities undertaken. Investment, in the way we’re using the word here, being that long-term decision to have a piece of a business for many months, possibly years.

Trading, as we’re using it here, is something different. That’s moving in and out of a stock with the aim of riding short-term movements in the share price. RC365 shares are not, not currently at least, for traders. For if we, when we, move in and out of a stock, we’ve got to take account of how much we’re leaving with the market makers as we do so.

As individual traders, if we move in and out of some really popular American stock – say TSLA or MSFT – then we can almost certainly buy and or sell at the same price. The spread between buying and selling prices, given an individual’s likely deal size, is zero, that is. A 1% move in price can therefore be thought of as a 1% profit – assuming we were on the right side of the move of course.

The smaller the company, the less liquidity in the shares – that is, the fewer other people buying and selling – then the wider that spread can become. Currently, the spread, the bid/offer, on RC365 shares is 50%. We can buy at 20p, we can sell at 10p. If we buy at this price – and that spread remains constant – then it means we need another 50% rise in RC365 shares before we can turn a profit on the deal. Or, if the spread had remained constant at that 10p, that past 100% price rise this past couple of days would only just now be coming into profit with any further price rise – the 100% price change already would have been swallowed by the spread.

It’s entirely possible that RC365 shares are worth investing in, they might not be as well. Our point here is, though, that given the spread on RC365 Holdings, they’re not shares for trading.