Not all stocks deserve long-term commitment.
For volatility-only, non-dividend stocks, Micro Harvesting defines a clean endgame: once capital is recovered, only profits may remain at risk. This post formalizes the Profit-Only Residual Rule—a disciplined way to participate in upside without risking principal.
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- Why This Rule Exists
- The Rule (Plain Language)
- What “Profit-Only Residual” Actually Means
- Why This Rule Is Necessary for Volatility Stocks
- What This Rule Is NOT
- Operational Mechanics (How It’s Applied)
- Psychological Benefit (Often Overlooked)
- How This Fits into Micro Harvesting
- Why This Rule Is Reusable
- Final Thought
Why This Rule Exists
Not all stocks deserve long-term commitment.
Some stocks exist purely for volatility extraction. They offer no dividend, no income stream, and no reason to be held once volatility dries up. Their value to a Micro Harvesting portfolio lies entirely in price movement, not ownership.
The challenge is this:
How do you participate in upside without risking capital once the opportunity has already paid you?
The Profit-Only Residual Rule answers that.
The Rule (Plain Language)
For non-dividend, volatility-only stocks, long exposure may be retained only if it is fully funded by realized gains. Principal must be fully recovered first.
Anything less is speculation.
Anything more is capital risk.
What “Profit-Only Residual” Actually Means
This rule separates a position into two distinct phases:
Phase 1: Capital at Risk
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Position is actively harvested
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Standard Micro Harvesting rules apply
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RGOC targets govern exits
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Capital protection is the priority
Phase 2: Capital Removed
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Principal has been fully recovered
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Only realized gains remain exposed
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Remaining position size ≤ accumulated profits
At this point, the stock is no longer a trade.
It becomes a residual option funded by the market itself.
Why This Rule Is Necessary for Volatility Stocks
Volatility-only stocks share common traits:
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No dividend
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No income rationale
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Interest disappears quickly
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Sharp regime shifts are common
Holding these stocks with unrecovered capital creates asymmetric downside:
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Upside is uncertain
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Downside is real
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Time works against you
The Profit-Only Residual Rule removes that asymmetry.
Once capital is recovered:
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Worst-case outcome is giving back profits
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Portfolio integrity is preserved
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Emotional pressure disappears
What This Rule Is NOT
To be clear, this rule is not:
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❌ A belief that the stock “won’t go to zero”
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❌ A justification to hold weak structure
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❌ A replacement for exit discipline
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❌ A way to bypass SUNSET decisions
The rule does not depend on optimism.
It depends on accounting reality.
Operational Mechanics (How It’s Applied)
The rule is implemented mechanically:
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Harvest volatility normally
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Track cumulative realized gains
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Once gains can fully fund a minimal position (e.g., one board lot):
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Lock in that residual
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Exit all remaining capital
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No refills
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No averaging
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No monitoring urgency
If the residual grows, it grows.
If it fades, it fades.
Either outcome is acceptable.
Psychological Benefit (Often Overlooked)
Once exposure is profit-funded:
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No fear of dumps
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No need to “defend” price
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No urgency to act
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No regret if it disappears
This is where trading becomes boring again—and boring is good.
The trader stops negotiating with the market.
How This Fits into Micro Harvesting
The Profit-Only Residual Rule is an endgame, not a core mechanic.
It applies:
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After successful volatility extraction
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After capital recovery
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Only to stocks with no income rationale
It complements:
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SUNSET Governance
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Non-Action Is a Valid Action
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Capital Protection First
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Harvesting Policy v1.0
It does not replace them.
Why This Rule Is Reusable
This rule is not specific to any single stock; it applies to all volatility-only positions.
It applies to any position where the sole reward for ownership is price movement, not income or long-term holding value—specifically:
- Non-dividend momentum stocks
- Pure speculative volatility plays
- Positions with no intrinsic reward for time held
By formalizing this rule, Micro Harvesting establishes a repeatable and disciplined exit state for volatility-only positions—one that protects principal, reduces psychological drag, and preserves future optionality.
Final Thought
When profits fund the position, risk disappears—even if price does not.
That is the entire philosophy behind the Profit-Only Residual Rule.
Boring.
Repeatable.
Sustainable.
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Disclaimer
This post is for educational and documentation purposes only. It is not investment advice. Perform your own due diligence and consult qualified financial professionals before making investment decisions. All strategies, frameworks, and examples described here reflect the personal methodologies of Micro Stock Trader and are not guarantees of future performance.
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