Every time a stock goes up or down, you should ask yourself:
Is this price movement based on changing fundamental or changing sentiment?
Sometimes the answer is not so obvious.
In such a situation, here is a good guiding principle.
It is better to be approximately right than to be exactly wrong.
Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
Showing posts with label price changes. Show all posts
Showing posts with label price changes. Show all posts
Friday, 10 October 2014
Friday, 22 January 2010
What drives prices to change?
In the long run, yes, definitely the fundamentals or value.
But between now and that distant tomorrow, the answer is supply and demand.
And the balance of those forces is not always rationally based.
It is at market-negotiated prices, not values, where we sell (and buy) stocks.
And markets reflect people, not fundamentals alone!
It is not the news itself that moves prices, but instead the response of investors and traders to that news.
To the degree that news constitutes a surprise, price will move dramatically.
The extent of changes in opinion can be measured in trading volume. That tells us the degree of surprise hitting the market and the urgency with which the affected traderss and investors feel they need to take action.
What studying volume does, in effect , is to reveal
Understanding the crowd's collective mind set is crucial to being on the right side of the price action.
Watching the crowd and the trading volume it creates will add a new dimension to your market and stock analysis.
But between now and that distant tomorrow, the answer is supply and demand.
And the balance of those forces is not always rationally based.
It is at market-negotiated prices, not values, where we sell (and buy) stocks.
And markets reflect people, not fundamentals alone!
It is not the news itself that moves prices, but instead the response of investors and traders to that news.
To the degree that news constitutes a surprise, price will move dramatically.
The extent of changes in opinion can be measured in trading volume. That tells us the degree of surprise hitting the market and the urgency with which the affected traderss and investors feel they need to take action.
What studying volume does, in effect , is to reveal
- what the crowd is thinking and
- how big that crowd is.
Understanding the crowd's collective mind set is crucial to being on the right side of the price action.
Watching the crowd and the trading volume it creates will add a new dimension to your market and stock analysis.
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