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If you buy stocks when they are on an upswing, then sell them after they go up a few points, won't you tend to make money? I understand that a lot of people make irrational decisions, and gamble more than they can afford without understanding the risk. But, if you are sensible about it, what are the pitfalls?

2006-12-21 10:54:33 · 13 answers · asked by martin h 6 in Business & Finance Investing

I guess I'm referring to people who make most of their living, like day trading, from buying and selling every day. I'm not talking about people with a retirement portfolio with a mutual fund.

2006-12-21 11:05:06 · update #1

13 answers

most people fail because of greed! They wait for it to rise one more point and before they know it they lose all they have because the bottom drops out

2006-12-21 11:02:50 · answer #1 · answered by ~♥~ *CHEEKY* ~♥~ 6 · 2 1

People act like sheep. They buy when the stock is near the top, and sell when it goes down.

As they say, bulls win, pigs get eaten.

You have to buy when it is cheap, and sell before it goes down. I actually made 50% on Enron in the early 1990's. If I had been a fortuneteller, I would have doubled my money.

If you do what everyone does, which is buy high and sell low, you will get what they get, which is the dirty end of the proverbial stick.

I quit messing with the market, because I had a lot less than the $5 million or so a true investor should have. Now I stick to mutual funds, and have beat the S&P every year but one since 1993.

2006-12-21 19:14:51 · answer #2 · answered by Richard E 4 · 1 0

The first rule of investing is discipline! It is what keeps you from being one of the irrational people. You develop a strategy and you stick to it. A mediocre strategy will make you money as long as you are disciplined enough to maintain it.

Then there is the second rule to finance"Bulls and Bears go to market but only Pigs get slaughtered!" This a great play on words describing greed. Greed gets to more people than you would think. They get a little taste of easy wealth from the stock market due to being lucky and don't understand true investors work hard finding what is valuable in the market place when every thing else stinks.

As far as the comment "selling after they go up a few points" in theory yes if there was no transaction fees, taxes, and little thing called the bid/ask price (How the market maker makes a profit).

2006-12-21 23:56:11 · answer #3 · answered by Stdonitus 1 · 0 1

Let me answer your question by first asking u:
1) How do you know that the stock price will go up. Do you have any insider information about the company.

Lets take an example:
If there is any positive news about the company and the stock price before the news is $10. As soon as the news comes out everyone in the market would know about it, and so the stock price will more up to $11 (assumption). So were you able to buy the stock at $10, no, then how could you buy at low and sell high., unless you get that information before anyone else in the market (insider information ;-) ....)

Traders are basically betting that stock will go up ...and they will be able to make money. And that is why most of them fail. Forget about traders, even hedge fund and mutual fund, experienced people are not able to get good returns.

Hope that helps.

2006-12-21 21:24:11 · answer #4 · answered by Gautam M S 1 · 0 1

Day trading is a lot harder than it sounds. The market is very unpredictable. Also, when you trade a lot, you spend a lot on commissions. Studies have shown, that for most people a buy-and-hold strategy works best. Of course, you should always monitor your investments.

If you are looking for great investment ideas, see what the best investors are buying and selling at http://www.top10traders.com - this is a free site that lets you create a portfolio of stocks with $100,000 in "play" money. Each day the site ranks the best performing portfolios, so you can see how your picks perform compared to other investors. You can also read posts on investing from the best traders, as well as share your own investing ideas. There is also a charting feature , so you can see how your portfolio performs compared to the S&P 500.

Here are this month's best traders:

http://www.top10traders.com/Top10Standings.aspx

Good luck.

2006-12-21 20:22:24 · answer #5 · answered by Anonymous · 1 1

There's a lot of research that supports your claim that individuals who actively trade do fail or at least significantly underperform the broader market. I think it's due to the fact that in the short term markets are very inefficient and stocks move sporadically without regard to underlying fundamentals so short term active trading for the great majority of people is very similar to gambling. If you are well diversified and a long term investor the major pitfall in my view is not having the stomach to stick with your investment plan through bear markets. Smart money stays focused regardless of short term market conditions. Unfortunately many individuals due to emotional reasons sell in down markets and buy in overhyped up markets.....it's human nature but a bad investment strategy.

2006-12-21 19:10:12 · answer #6 · answered by SmittyJ 3 · 0 0

There's a lot to your question, but it can be summed up quite easily like this. I'm an electrician, would you ask me to buy and sell your stocks? Would you give any credence to my suggestions as far as what to buy or sell? Then why, for heavens sake would you think that you can make these decisions? Contact a financial adviser and see if you can and should, invest some money into the market. Then ask that F.A. for a reputable broker to handle an account for you. If all goes well and you have chosen good reputable people, you (and they) will make money!

2006-12-21 19:07:04 · answer #7 · answered by Anonymous · 0 1

Here's the shortest comprehensive answer I can come up with:

1. Successful traders treat trading as a job. Many people see trading as a quick way to make a lot of money, like a lottery. Fact is, there's work involved, and it needs to be done with daily regularity.

2. Successful traders treat trading as a business. Successful businesses are adequately capitalized, have a reliable system for profit and longevity, and plan for potential losses.

3. Emotionally, successful traders need to be masters of themselves. There's plenty to be said for gut feelings, but if your feelings lead you away from successful trading, you need to change your habits and learn from your mistakes.

4. Successful traders take responsibility for their profitable trades and their unprofitable trades. If you place the blame anywhere else, you will be unable to learn from your mistakes.

5. Successful traders need to be willing to make mistakes without embarrassment. Making mistakes is how you learn to be a better trader.

As a force of habit, education, parenting, and social pressures, most people (80%+) are unwilling to do what it takes to be successful in trading. Being smart vs. being stupid generally has little to do with it.

2006-12-21 21:58:32 · answer #8 · answered by John C 2 · 0 0

People are impatient........

I had a co-worker who bought Wachovia Bank (WB) in 2003 for 32.18 at a 100 shares. The next day the stock dropped 18 cents. YES 18 CENTS AND YES DROPS IT BECAUSE SHE GETS NERVOUS. If she would of held she would be collecting a close to a 5% dividend yield when she bought the shares and almost double her money in principle.

2006-12-21 19:19:36 · answer #9 · answered by Anonymous · 1 0

1. Greed.. Don't take their profits when there ahead.
2. Follow these bozo's on talk radio and TV when they say it is
a good buy.
3. Follow advice from a broker who makes stock
recommendation in favor of the company.

2006-12-21 19:21:41 · answer #10 · answered by Grandpa Shark 7 · 0 0

best way to improve on amounts under 10k should be invested into mutual funds, using either a professional stock broker, or just going to your bank will best help you choose where to invest this money... now if you are trying to make a dollar out of 15 cents then i suggest you take off the color specticals and enter the real world of investing and realize that if you have nothing then saving in something long term will provide something more later...

2006-12-21 19:32:12 · answer #11 · answered by Thybroker 1 · 0 1

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