Is it a good strategy.....?

Question

to buy some affordable stock that has experienced a low dip hold on to it until it has risen to a peak and then sell it. After that find a slightly more expensive stock that has experienced a decline but is starting to rise again and when it too has reached a nice peak to sell this stock for more expensive stock and keep doing this?

Answer 1

I don't understand why people are giving you so much flack.

Yes, it's a decent strategy as long as you know what you're looking for.

One prime example of this working is gold last year. It was in a long term uptrend, then had a pullback. During the intermediate pullback, the price continued to decline.

Then, it bottomed out, and then it broke the intermediate trend line and started back up again. As such, it continued to rise and did quite well.


This is a strategy used by many, but in general, you have to know what you're looking for in order to profit from it.

The same happened for many other stocks as well.

As I said above, the key is knowing what to look for and being able to spot it when it happens. That's the challenge! ;-)

Hope that helps!


P.S. The way many people do spot this is to use support and resistance and generally a moving average crossover or stochastic crossover system. Generally, a stock or sector is ready to resume its longer term trend when the stock/sector breaks the downtrending resistance line in addition to breaking back above a moving average line. Having the technical indicators crossing over as well is a nice bonus. Good luck!

Answer 2

The first problem that I see is that you appear to be evaluating stock, at least in part, on the price per share. If a stock is selling for $40 per share and has a 2:1 split it will then be selling for $20 per share but it will not be any better or worse deal than it was before the split.

The second problem that I see is that it appears you want to buy a stock because it has declined in price and sell a stock because it has gone up in price. While that strategy will work sometimes, I believe it is more likely to underperform the market. Stocks usually go up because there is good news about the company and go down because there is bad news about the the company. If "the market" overreacts to bad news it is true you can get some bargains that way, but you will find the market is efficient enough that a lot of the time when a stock goes down the news was bad enough that the stock will to keep going down.

Answer 3

Well, except for the continually rising stock price part, that's exactly what every investor hopes for. Find good values on stock prices when good companies have a dip. Wait for it to go up to where it should be, and cash in.

That being said, I'd just keep working until I could afford shares in Berkshire Hathaway. Their A shares closed at $106,800 today. Even their B shares are $3558 per share.

In case anyone was wondering, Berkshire Hathaway is Warren Buffett's company. He's the 2nd richest man on the planet, all that money made through his stake in that company, and his investments.

I know I'm not a better investor than he is. So why not just let him do my investing for me?

Answer 4

how do you know a stock will go back up? what if it is on its way down and hasnt gone down all the way yet? what do you do if it becomes nothing? if you do this, all the stocks you buy have a higher chance of bankrupting then stocks that are going up....Why dont you try buying stocks that are on its way up instead of buying stocks that are lower then usual...what is "usual" by the way? What if there's a split? 2 to 1 split? 3 to 1 split? And their prices go haywire...then how will you know? And furthermore...how do you know a stock is at its peak? Your strategy is not that good...Because Berkshire stocks are the most expensive stocks in the world I believe. and their stocks go from 30 thousand to over 100 thousand..What if you were buying and selling..and you work your way up to like 1 or 2 Berkshire stock...You paid 90k each..and then what happens when they go down to 35k each? I think you really need to hit the books before you start buying and selling stocks. ...Stocks go up and down all the time..You are not focusing on when they are low....I dont care how low or high it is...you are supposed to buy it when its about to go up....thats what you need to focus on..and the second thing is...when its about to go down..or when it has hit its peak....

Answer 5

Most will generally agree that your "revolutionary" strategy of buying low and selling high is a good one.


Most 3rd graders -that is.


And there again they could probably figure that out without even using the internet.


Please move along.

Answer 6

No.

You will find that transactions costs eat into your profits. It is generally better to buy and hold.

Answer 7

No.