When an investment (stock or real estate) is falling down from the very peak, we tends to think that "wow, that's a bargain price, time to jump in." But do we really know the price is already hit the bottom and ready to bounce back , or is it just the beginning of the price's free fall and price is going to get even lower. This is the questions most of us will face in our investment decision. Let's buy it now, this is a great price, 20% below the peak! Na, the price will come down more. Which one is right and how do we know? The fundamental answer lie in the approaches: Predicting or recognizing? Every can predicts things, I can predict predict stock market is in upward trend next month, while you can predict it is the other way. This is purely 50-50% chance to get it right, just luck. If we're lucky, we can make some nice profit. But if we guess it wrong, we're catching a falling knife that is going to hurt our wealth further and further. In recognizing, we 'll look into the price pattern, the chart, the market, the demand and supply, the trend, the news, and even the economy, the purpose is to collect as much information possible so we can make a more informed decision. We still couldn't get to 100% right, but it definitely will increase our 50% position to high level by adding the odds on our side, and our chance of winning. Avoid the falling knife! Learn to recognize rather than predict to build it right.
Wednesday, October 31, 2007
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3 comments:
analyze the information before making a quick decision will always help. "catching a falling knief" will cut your hand!!haha
I believe more in trend that catching the bottom. I believe most people who is unsuccessful in trading because they try to catch the bottom. I also suggest people to trade stock only at the end of the market becuase when you trade during the market, you always get a loss trade. Of course it is better to sale if the stock is falling. I also like to play trend rather than buy low and sale high in short time. It is impossible to get out quick enough because I am using yahoo fiance.com.
yep, many people will say "this is for long term" when they see their stock value drops, drops and drops. Instead of holding to it, the smarter way is to sell to cut loss. There are many up-rising stocks to buy if we learn how to analyze.
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