Tesla is one of the most popular stocks among investors and day traders. that it very volatile And liquid, making it easy to buy and sell. Also, stocks are offered by most online brokers, including those that offer CFD products.
However, it would be a mistake to reduce Tesla to just stock in the electric vehicle category. As we will see in the article, the company’s spheres of influence are diverse. There are also many catalysts that move stock value.
In this article, we will explain the best strategies for day trading Tesla shares (and why they are risky for a long-term investment).
What is Tesla?
Tesla has it It grew from a small, unprofitable car manufacturer To the largest company in the industry by market capitalization. At the time of writing (March 2023), Tesla has a market capitalization of over $602 billion.
In contrast, Ford has a market capitalization of $42 billion while General Motors has been estimated to be around $47 billion. Overall, Tesla is more valuable than other automakers combined.
There are three main reasons why Tesla is a valuable company. Firstly, The company has a strong market share in the electric car industry (EV). It has a leading share compared to all electric vehicle companies globally because of its first-mover advantage.
Secondly, Tesla has a strong market share in the freight industry. In the United States, the company has thousands of supercharged infrastructure. As such, with concern about range a major concern among EV buyers, having this infrastructure makes Tesla more attractive.
third, Tesla technologyLike on autopilot More advanced From other companies such as General Motors and Ford. Moreover, Tesla is the only company that profitably manufactures and sells electric vehicles.
The importance of Tesla in the electric vehicle sector
Tesla is widely seen as One of the most important companies of the last few decades. That’s because the company was able to revolutionize one of the most important industries in the world. While electric cars have always been around, Tesla has made them more attractive to the masses.
Moreover, Tesla has helped disrupt the industry that drives global carbon emissions. As the world continues to struggle to reduce these emissions, Tesla has become a major part of the ecosystem.
Day trading or investing in Tesla?
A common question is whether one should Day trade or invest in Tesla Involved. Historically, both options have been very profitable.
for investorsTesla It was a very profitable company For example, its stock rose from about $1 in 2010 to about $190 in February 2022. At its peak, the stock was trading at $415.
but, as an investmentAnd Tesla is a risky company Because of the industry you work in.
For example, while Tesla has an industry-leading market share, The company faces stiff competition From companies like Porsche, General Motors and Ford. It also competes with pure gaming companies such as Rivian, Lucid, and Nio. This partly explains why Tesla shares are down more than 40% from their all-time high.
Our suggestion: day trade Tesla stock
there many reasons Why do we recommend Tesla stock day trading. First, the stock is highly liquid, with Millions of shares are exchanged every day. This volatility means that all types of day traders can benefit from its movements.
second, Tesla is always in the news, which is good for people who trade stocks daily. Some of the popular headlines come from Elon Musk and Wall Street analysts.
Moreover, there Lots of stimuli for Tesla shares. Some are company earnings, analyst ratings, Elon Musk’s tweetsand even monetary policy.
How to analyze Tesla stock
There are several ways to analyze Tesla. First, you should look at Company car delivery. Like other companies in the electric car industry, Tesla publishes its monthly shipments of vehicles. As such, you should always watch these numbers and see if the company’s business is improving.
second, Have a look at the company’s revenue growth and profitability. As shown below, the company’s revenue jumped from more than $21 billion in 2018 (2 billion in 2013) to more than $81 billion in 2022. Its total profit also jumped to more than $20 billion.
Third, look at the company Earnings growth and profitability. The company went from losing $862 million in 2018 to more than $12 billion in 2022.
Further, look at its key multiples such as price-to-earnings (PE), price-to-sales (PS) and enterprise value-to-EBITDA (EV-to-EBITDA) multiples.
Related “ What is EBITDA?
These complications are important because they appear How do investors value the company?. However, as seen below, Tesla is one of the most expensive companies to invest in.
The main catalysts for Tesla stocks
There are many catalysts driving Tesla stock prices. Among the most famous:
- earnings Like all stocks, Tesla shares interact with the company’s earnings. In most periods, a stock jumps or slides by double digits after a company posts its earnings.
- Analyst ratings The other major catalyst for the stock is the analyst ratings. Promotion from a principal analyst tends to move the stock up and vice versa.
- Elon Musk tweets – Sometimes, the stock reacts to tweets and other statements made by Elon Musk. He is one of the most followed people on Twitter.
- New product launch Tesla stocks tend to react to new product launches. For example, it rose after the company made an e-truck presentation.
- Monetary policy The stock tends to interact with monetary policy. In most cases, the stock tends to do well in periods of low interest rates.
- delivery As mentioned, Tesla reacts to vehicle delivery numbers that are published each month.
Tesla stock day trading strategies
There are many strategies that you can use to day trade Tesla stocks. Some of the best tactics popular with traders are:
- Scalping Scalping is a trading strategy that involves buying or selling a stock short and holding it for a few minutes. The goal is to get out of a trade with a small profit several times a day.
- Arbitrage – This strategy involves buying Tesla and shorting related stocks and vice versa. The idea is that Tesla is moving in the same direction as other big tech stocks. As such, you can profit from the difference between profit and loss.
- Paid Also known as trend following, this strategy involves buying the stock when it is rising and vice versa. This strategy is best used with trend indicators such as moving averages and Bollinger Bands.
- VWAP strategy The main strategy is known as the VWAP strategy. It involves buying stocks when it exceeds the VWAP and vice versa.
- fading This is a strategy that seeks to take advantage of pullbacks that occur after the market opens. If Tesla shares open much higher, the move can fade away or wait for a pullback.
Reasons to avoid Tesla inventory
As mentioned, there are many reasons why you should avoid Tesla As a long term investment. They include:
- evaluation Tesla is one of the most valuable stocks in the world. It has a PE ratio of 52 and a forward EV to EBITDA multiple of 20.
- China exposure The company has strong exposure to China. As tensions mount, the company is at risk if the situation escalates.
- The dangers of Elon Musk Tesla is fully affiliated with Elon Musk. As such, there are dangers due to his sect.
- a race The company faces major competition from the likes of Rivian, Lucid, Nio, and Xpeng.
- Requests – There are indications of declining demand for electric cars, which explains why the company has recently cut its prices.
summary
In this article, we’ve taken a look at what Tesla is and whether you should invest or trade the stock. in our vision, We think Tesla trading is much better of investing in them because of the significant risks involved.
Some of these risks are being assessed, the competition, and the fact that demand seems to be declining.