Monday, December 17, 2007

Stock Investing Advice

So here is an important piece of stock trading advice. Do not chase sudden move stocks. Very important rule to remember. The idea is to buy stocks before movement. Stock prices go up because there are usually large amounts of people buying the stock. A slow, upward trending stock is different than a rapid uptick in price. Rapid upticks have a tendency to correct very quickly. Or to plummet very quickly. Always be suspect of rapid shifts in price.

Stock chasers tend to make a habit of it. They look for rapid movement and jump on the bandwagon. It's a very bad habit to be in because what goes up quickly can fall quickly. Don't buy late.

Typically late buying stock chasers are operating off greed. The greedy investor is setting themselves up for a major downfall.

My advice is to be patient and look at another stock. Never jump on the bandwagon. Never purchase on a rising stock price alone. Stick to a sober, patient stock investing plan.

One exception to consider is a rise in price based on major company news that catches the market off-guard. A good example is a highly profitable merger that comes out of nowhere. A few months ago I purchased stock when a sudden announcement that a construction and engineering giant was being purchased by another construction giant making them the largest player in their industry. Historically in business only the top two or three players in a field survive. The small firms go under or are acquired. So a merge creating the market leader is normally a great sign the stock price is going to have a profitable, healthy future.

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