by Brice Oh

Created on: September 20, 2008   Last Updated: October 08, 2008

Enter and exit at the right moment

"Buy low, sell high" is what we always see or hear in a stock market. It is a very simple theory, but hard to preach. Some people like to "Buy high, sell higher". Knowing when to enter and exit would definitely bring you tons of profits. Normally timing of stock market is done by swing traders or day traders. They use various technical analysis methods to decide when to enter and when to exit.

It was sometime advice not to predict the market as no one knows what would happen in the very next moment. However, we can still safely time the market. I was a day trader who trade few times a day. It was exciting when a stock is volatile with a lot of players in it. Some stocks are dead, some are very alive. Hence, for a day trader, we would normally go for a speculative stock.

There is a term called breakout where a stock surges after a price was hit. With a combination of a few components, we could predict if the stock were to surge. However, sometime it may be a false alarm when the breakout was invalid. Traders who buy high and sell higher were the ones who bought when the stock break its psychological ceiling of a certain price. When that level was broken' by strong interest in buying, the stock would be able to make a new high. Hence, it would be a time for us to enter the trade.

Sometime it was a very short run. We could sense it through its momentum. When the uptrend loses its steam, we should not be greedy but sell into strength before it is too late. Thus, we should remain vigilant and active during the trading time.

Why is it when we know the theory of buying low and selling high, we still loses money? When you look back at your trade, you would realize that the trades that you did are not what you initially planned to do. This is due to the emotional that was put into a trade. Emotions could change your logical thinking and hurt your profit. Therefore, it is hard to predict the market unless you have no emotions but logical thinking.

The best way to "Buy low, sell high" is to buy into fear and sell into greed.

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