Tried buying low and selling high? Tried jumping into a stock based on a news article, earnings release, or a guru’s recommendation?
Do you feel beat-up and confused?
Are you feeling like you’re not getting anywhere?
This article will help.
Buy low and sell high sounds good, but it is a fool’s strategy.
More amateur traders are killed following this strategy than any other trading strategy.
When an amateur trader executes a buy low, sell high strategy, he buys what he thought was a low, only to watch his stock go even lower. For the amateur trader, buy low and sell high really means buy low and sell even lower.
No BULL should be trying to buy low and sell high.
No BEAR should be trying to short high and cover low.
Professional bull traders buy high and sell even higher.
Professional bear traders short low and cover even lower.
Professional traders are like surfers who patiently wait for a wave to catch. Amateurs jump in quickly because they are driven by emotions. They are dunked by malformed waves which break too quickly and the result is that they bleed their equity into the markets.
A professional trader waits for a familiar pattern to develop. He sees the right size wave coming in with rising volume indicating higher prices ahead. He has a defined goal of how he’ll get in, where he’ll take profits, and where he’ll take a loss if the market turns against him.
Markets filled with greed or fear make for the best markets to trade. When the crowd is gripped by greed, amateurs jump in pushing the price higher. When the crowd is gripped by fear, they sell in panic pushing the price lower. Emotional markets always overreact either to the upside or to the downside which creates opportunities for disciplined traders. The professional trader scans for these brief periods of inefficiency in the market.
Professional traders don’t like efficient, calm markets. Ranges tend to be too tight and commissions take a bigger chunk of profits.
Emotional swings provide trading opportunities, while efficient markets chop up and down, offering no edge to traders, only piling up their costs. Technical analysis tools will work for you only if you have the discipline to wait for patterns to emerge. Professionals trade only when markets offer them special advantages.
A good trader realizes the chaotic and random nature of markets. He looks for brief predictable patterns to form and he trains himself to buy and sell where he sees those patterns.
I hope you enjoyed this article. Leave any comments you might have below. Thank you and happy improved trading.
Lance Jepsen
President, GuerillaStockTrading.com
Your Trading Coach
(because everyone, even Tiger Woods, needs a coach)
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