Buying cheap stocks is like walking on the thread. You know what will happen once thread is cut.
If any of the institution is pulled out the money from the cheap stock, the price of the stock will just free fall.Because these penny stocks are holding by 1 or 2 institutions. No institution will not ready to buy cheap penny stocks. They prefer to buy high quality stocks which is more than $20.
All penny stocks will disturb your emotions a lot because of volatility.So beware of buying penny stocks.
Can you swim against the flow of the water in the river ?
Even you are a good swimmer , you will definitely fail in the later stage.
Thats what happens to good fundamental stock in the market correction. Just imagine what will happen if you are holding worst fundamental stock … Don’t you think you are doing suicide yourself ..
Its better not to invest any longs during the correction. It is very difficult to go against the trend. Patience is key at this point.
Yes. Nature tells everything if you observe closely.
For example, every year there is a spring, summer, winter and fall. Once season starts, it will stay for a while. The season changes very slowly it will take either 1 or 2 weeks, but definitely not in a day. When the season starts to change, you will see one day you feel like cold, other day you feel like hot , another day you will see rain and sometimes it would be both cold and hot etc. There is little bit of turbulence or whipsaw in the weather before it actually starts the season.
This is exactly with the Stock Market. Trend (Bull or Bearish) will not change in a day. It will take a while to change either bullish or bearish. When it tries to change from bullish to bearish, there will be lot of up and down days before it trends to bearish. Same in the case of bearish to bullish. There will be tough war between bulls and bears to determine the direction of trend. If trend starts, it will continue for a while. Most of the people will be overlooking and feels like market corrects at anytime. However, it never happens.
How can you determine whether the trend is changing?
It’s dead simple. For example if you take the above example, when the season changes to summer, what can you observe?
The temperature increases day after day. You can feel the high temperatures in 1 or 2 days during the starting of the season. But It is not continuously. It will take a while to feel high temperature days. When the season starts to ending, then there will be 1 or 2 days temperature drops and after that the next season takes off.
Exactly same principle applies to Market. You can see the 2 or 3 up days before market changes to bullish mode and bull trend continues afterwards. In the market terminology, it will be ‘Follow thru’ day. Mutual funds, Hedge funds and other institutions are putting money into the market once they see the market character is changing. They are continuously investing with small amounts. So like that, you can see the lots of stocks are breaking outs at that time. For example, if you see the stocks are breaking out either 4% or 5% or 6% continuously, then there will be indication that the major institutions are putting money into the market. This is what called ‘Market Breadth’. And also, Institutions won’t take out money in a day, because they handle with millions or billions of money. They will take out with regular intervals. Same in the case of Bearish trend.
Sometimes, you can observe that there will be 1 or 2 big down days in a uptrend. That’s fine , if you are sitting in the good fundamental stocks, it will come up easily. Because market breadth won’t affect that fast. If you take the above example, you can see there will be heavily rainy days during summer, it doesn’t mean summer is ending.
All books are telling same thing in a very complicated manner.
Nature reveals subtle truths if you observe closely….
Don’t you see the similarity between this bird and falling the market ?
How long does it take to turn from down to up ?
Don’t you think it needs to stabilize for a while before going up in the sky ?
We need to catch the bird before going upward . Until then , its better to keep quite.
When you learn from the nature, you will understand the market easily.
Here i want to explain why trading and life are very much similar..
There is no difference between Life and Trading as per my experience. Life has ups and downs and Trading has up and downs. But, how you treated with life is only in your hands and which is similar in the case of trading too. Personality of the life and personality of the stock runs according to law of nature.
Every person has some kind of unique personality and has same kind of emotions. Whenever he/she gets the angry, happiness, sadness, jealous etc, he behaves similarly as compared to other person. Every stock has its own character and personality, runs in his own way, but acts in very much similar manner whenever it has good / bad news.
Fundamentals are very important in everybody’s life and if the fundamentals are good, he takes a right decision even though environment is good or bad. Fundamentals of the stock are also important whether it move upward or downward direction. Fundamentals of the stock would be Earnings, Sales, Fund ownership, float etc. All the stocks with same kind of fundamentals behave in similar manner. If we experience happiness and the expression would be Smile. If the stock has good earnings and sales report, it tries to go up either in the short term or long term.
If you understand your own psychology, you will understand the stock market psychology. Because it is running by the people with similar kind of expressions.
You need to know yourself first, and then only you will succeed in stock market. This is essence!!!
