Everyone wants a good deal. If you don’t think therefore, simply look into the day-after-Thanksgiving product sales with most people lined up outside the stores at 5am to buy merchandise on sale. We want things now and we want them cheap! When it comes to stocks, however, I know better.
They say to buy low and sell high. It’s an excellent concept if it could be got by you to function, but it means that buying low is normally the first thing to do. Novice stock traders look to buy “cheap” stocks, whether it’s just a low-priced stock or a stock well off its highs. Remember, cheap shares tend to be inexpensive for reasonable!
Low-dollar shares often fall into 1 of 2 categories: the previous high-fliers that have split so often and come down so far that they are simply too liquid and “thick” to make much of a move (LU, NT, etc.), and stocks which are cheap because they fizzled out long ago and no buzz has been generated since. These types of shares don’t move more than enough for a dynamic trader, if you don’t are as thinking about trading therefore many shares that your broker makes as very much in commission as you perform in profits.
A downtrending share is building lower highs and lower lows. Money is coming out of it. People are walking away in search of finding something more attractive. When you buy a stock, you want it to go up, so look for stocks with some buzz, some positive activity, plus some momentum.
A good example of how disastrous it could be to get a downtrending stock is MOVI. This stock started trending lower many a few months ago, and provides shed the majority of its value.
MOVI continues to development lower, and purchasing a “cheap” stock would have been costly!
Consider the novice traders who wanted to buy a stock off its highs. They may have moved in to pick up shares inlate June near $27 or so, which was more than $7 off the recent high. Those buyers hardly ever saw their trade convert profitable. Imagine if they “averaged down” in the $20 region, hoping to catch an instant bounce to allow them out? All they do was substance their losses. How about now that the share is trading near $5.00? Would you are feeling like waking up and running after dropping off a 20-tale building? This stock probably doesn’t either. It’s best to stay away from chart patterns like this until the purchasers regain control and the stock begins to build some upside momentum.
Buying stocks in downtrends is definitely a recipe for disaster. Save your valuable bargain-hunting for the retail vacation and stores shopping, but prepare to pay out up if you would like to get a stock and turn a profit!