Tip 9: Long Rising Stocks, Short Falling Stocks

In many ways trading and investing in the stock market comes down to probabilities. We assess the probability that a stock will go up or down, a company will grow or fail, a sector will expand or contract, or the whole market will continue its uptrend or downtrend.

Although it seems simplistic, it bears repeating. We want to increase our odds of making the right decision. In order to do so, we need to be aware of several situations. If we are going to buy a stock, we want its trend already to be going up. We want its sector to be doing well. And we want the market to be in an uptrend. If we are going to short a stock, we want it already to be in a downtrend. It’s also best if its sector is lagging and it’s best if the market is in a pullback or correction.

While it’s tempting to buy or short a stock when we think it’s on the verge of a change in trend, it’s mighty difficult to predict consistently and going against the trend is a unnecessarily difficult strategy. It lowers the odds of success. The market is constantly surprising people with how far it can take its trends.

Make life easier by stacking the odds in your favor. If a particular stock has less favorable odds, look elsewhere. There are thousands of stocks out there. You can find one that you like and that also has a good probability of making you money. Or, if you’re partial to a particular stock, wait until the time is right before making the trade or investment.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s