11-20-2022, 10:44 PM
Buy stocks which are already in an uptrend to improve your performance.
<!-- SC_OFF --><div class="md"><p><strong>Buy stocks which are already in an uptrend</strong></p> <p>Most retail investors follow the "buy low, sell higher" rule and buy a stock when its price falls. Let us carefully examine the first part - "Buy low" doesn't necessarily mean to buy a stock when its price is at a discount. Although this strategy may work in some situations, many investors incur huge losses by buying stocks in a downtrend. For example, a stock drops from $100 to $50, and you bought some shares thinking the price may not go any lower. The stock price may recover and start trending up, but what if it drops to $40? Do you buy more shares and average down? What if the stock price further plummets to $20? No matter how good a company is, its stock price can still go lower. Stock market history provides many instances where stocks of once great companies went to Zero, and averaging down will wipe out your capital.</p> <p>Imagine you are running a fashion boutique with ten green and ten red dresses in the store. For whatever reason, consumers are eagerly buying red dresses compared to green ones. Now, if you want to re-stock your store, which dresses would you order more - green or red? The red ones, because they are in huge demand and selling out quickly. And what happens to the existing green dresses in the store? - you would offer a discount to sell out the low-demand merchandise to make space for the ones in high demand(red). Similar to the fashion boutique situation, as a stock trader, the goal is to buy stocks having high demand and sell them for a higher price to book profits. But, the price of a product with high demand will never go from $100 to $50. Instead, it will be trending upwards to greater than $100. That's why you don't buy stocks in a price downtrend. A downtrend implies lower demand. Change your mindset to follow the "buy high, sell higher" rule. Buy high means looking for stocks that are in an uptrend.</p> <p><strong>If you avoid buying/averaging down stocks in decline and only purchase stocks which are in uptrend, your results will improve significantly.</strong></p> <p>Hope this helps someone and let me know if you have any questions or doubts about this.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/venkateshkoka"> /u/venkateshkoka </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/z01jiw/buy_stocks_which_are_already_in_an_uptrend_to/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/z01jiw/buy_stocks_which_are_already_in_an_uptrend_to/">[comments]</a></span>
<!-- SC_OFF --><div class="md"><p><strong>Buy stocks which are already in an uptrend</strong></p> <p>Most retail investors follow the "buy low, sell higher" rule and buy a stock when its price falls. Let us carefully examine the first part - "Buy low" doesn't necessarily mean to buy a stock when its price is at a discount. Although this strategy may work in some situations, many investors incur huge losses by buying stocks in a downtrend. For example, a stock drops from $100 to $50, and you bought some shares thinking the price may not go any lower. The stock price may recover and start trending up, but what if it drops to $40? Do you buy more shares and average down? What if the stock price further plummets to $20? No matter how good a company is, its stock price can still go lower. Stock market history provides many instances where stocks of once great companies went to Zero, and averaging down will wipe out your capital.</p> <p>Imagine you are running a fashion boutique with ten green and ten red dresses in the store. For whatever reason, consumers are eagerly buying red dresses compared to green ones. Now, if you want to re-stock your store, which dresses would you order more - green or red? The red ones, because they are in huge demand and selling out quickly. And what happens to the existing green dresses in the store? - you would offer a discount to sell out the low-demand merchandise to make space for the ones in high demand(red). Similar to the fashion boutique situation, as a stock trader, the goal is to buy stocks having high demand and sell them for a higher price to book profits. But, the price of a product with high demand will never go from $100 to $50. Instead, it will be trending upwards to greater than $100. That's why you don't buy stocks in a price downtrend. A downtrend implies lower demand. Change your mindset to follow the "buy high, sell higher" rule. Buy high means looking for stocks that are in an uptrend.</p> <p><strong>If you avoid buying/averaging down stocks in decline and only purchase stocks which are in uptrend, your results will improve significantly.</strong></p> <p>Hope this helps someone and let me know if you have any questions or doubts about this.</p> </div><!-- SC_ON --> submitted by <a href="https://www.reddit.com/user/venkateshkoka"> /u/venkateshkoka </a> <br/> <span><a href="https://www.reddit.com/r/investing/comments/z01jiw/buy_stocks_which_are_already_in_an_uptrend_to/">[link]</a></span> <span><a href="https://www.reddit.com/r/investing/comments/z01jiw/buy_stocks_which_are_already_in_an_uptrend_to/">[comments]</a></span>