June 27, 2014

The Rule of Stock Market

Photo by Wing from Wikimedia Commons

There is a simple rule that had encompassed the stock market for over a decade; "buy low sell high". Even in the rules of business, the saying goes on.

If there is a rule in stock market that the players should always remember, this is the rule. You don't have to be a genius to understand the term. This is very basic rule, but some forget how to use it.

New investors buy stocks while the price is trending up believing that stock will increase further. The question here is, where is the highest gain? Is it in the trending up stocks or trending down stocks?

This is not to say that there is no profit from trending up stocks; there is. However, what we want to attain in investing is to minimize the risk and maximize the gain. If you buy, just because the stock is increasing, you might put your investment in danger. If the stock is over priced, the tendency of the stock value is to go down until it reaches the optimal level. While under priced stocks, because it is under priced, has no tendency to go down but to go up until it reaches the optimal level.

Finding under priced stock is not easy. Unlike trending up stocks, that are easy to see (you will see them in the business news headlines), under priced stock will require more research.

Always remember the rule, "buy low sell high".  Don't forget to do your research, and most of all don't speculate.

PSE yesterday, June 26, closed at 6,892.18 up by 0.84%.

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