Dumbass has $100 and buys 1 share of a $100 stock.

Undertrader has $100 and buys 10 shares of a $10 stock.

Equal amount invested.

Let's say both stocks double in value to $200.

Dumbass has to sell his entire position to pocket his $100 gain and he is then taxed at (roughly) 30% for a $70 gain.  Not bad.

Undertrader wants that $100 profit, but instead of selling all of his shares, he sells 5 shares at $20, which is $100 and he keeps 5 shares worth $100.

Now, stay with me here, you only pay taxes on your gain.  So, Undertrader sold 5 shares, which is $10 gain each share, or $50 in capital gains and $50 in original investment, so I took my $100 profit, but I'm only taxed on $50 of it.  At 30% (roughly) taxed amount that's only $15 I pay in taxes, so let's see where both traders are sitting.

Dumbass - $170 cash.

Undertrader - $100 in stock and $85 in cash.  I'm $15 ahead and still have my original investment.  

That's the magic of avoiding taxes and keeping your gains.  Like I said, your goal is to amass shares.  If you do this little trick to get cash without getting hammered in gains, you can flip that cash back into the stock when it drops.  So let's say both stocks drop back to where they were.

Dumbass can buy 1 share of his $100 stock again and has $70 cash.

Undertrader can buy 8 more shares of his stock to have 18 shares and $5 cash.

Huge difference.  This is the key to trading stocks and being successful and tomorrow we'll talk about why the share price doesn't need to go up to be successful...

Invest in peace...