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Thursday, February 16, 2012
Sunday, August 28, 2011
The Cyclical Nature of the Stock Market and Individual Securities
stock market is often thought of as difficult to tame the beast. So many people have lost money in the stock market that many have moved away from him, or at least put their money into the hands of "professional". The fact, however, that the stock market has its ups and downs, but ultimately shows up. In other words, more than almost any decade, the stock market higher at the end of ten years than the first. So, if you buy the "market", 99.9% have some chance of making money if you hold on long enough.
The same goes for individual stocks, but they tend to fluctuate more than the market as a whole, and thus the potential for greater gains. For example, Wal-Mart has fluctuated between about $ 50 and $ 58 in the past year. So, that would be safe to say that in the past year, nowhere near the $ 50 is "low" and nowhere near the $ 58 "high ."
Now we can see the future, but we can predict based on what we know. So if Wal-Mart at $ 59 next month, would you buy it? Most people would, because they saw that the "good", but remember the old adage that "what goes up must come down?" That does not mean that Wal-Mart will get even more, but the chances of it so far outweigh likely to drop some of the first. Now, if Wal-Mart declined to $ 49, would you buy? Most people would not, because they will see that Wal-Mart "does not work so well, 'but that's precisely why you should ! It's history shows that $ 49 is very low (at least for the last year), so why would you buy? Chance to go up by $ 49 is much greater than the chance to go above $ 58 any time soon. Herein lies the opportunity.
If you bought Wal-Mart at $ 52 and held until it hit $ 56, which is likely to happen within a few weeks, you can turn pretty quickly and then get a similar look for another opportunity somewhere else (or ideal for the same thing with many stocks at once). On May not seem like much, but when you do it more and more, you can make some serious money. It will not always work, but statistically, this method gives you the best chance of calling the right shots, and all you need is a reading chart.
One last note: to work, companies that buy and sell should be relatively high, trading at least $ 10 million worth of shares a day. Otherwise, the fluctuations are too large and become far less predictable.
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