Monday, August 11, 2008
The WHEN in Make Money on the Stock Market
Knowing rightly WHEN to BUY and WHEN to SELL makes one a rich man.
Every body wants to make money; many people know how to make money, but less people actually make money, because many more people know not how not to lose money. That explains why more people lose money than those who make money. Money is only made when an investor sells his shares for more than what he pays for them, that is, the returns exceeds the costs of the shares.
The paramount strategy to make money is to get others to lose money, a principle that is this simple. It is said that a fish will not get caught if it does not open its mouth to take the bait, and this baiting tactic is so evidently employed in the stock market all the time.
When a company makes profits it attracts attention, and when it shows its potential to make humongous profit in the future, it draws investors like ants to sugar; the reverse applies oppositely. This is fair if the company's intrinsic quality is as real as it appears, but this is very hard to tell, because lemons can sometimes be made to look like oranges. Suffice it to say, only those who have intimate knowledge of the company really know its true worth, all others know it by its propaganda. So, what do people really get for what they pay for; if it turns out fair they gain, if not they lose.
To make money is a perpetual lure, and all sorts of instruments are theorised and employed to enable people to spy and snoop on the ones who are truly privy to the knowledge, and also on those who start the propaganda, on the basis that whether the news is true or not the attraction will be about as equal as the true one. To be useful the gain of this knowledge needs to be as near as possible to the source, just like that the nearer the ripple is to its cause is the more powerful than the outer ones. Being ahead gives one the advantage and a bigger scope for action.
One of the most widely used instrument is called TA or Technical Analysis. TA identifies tell tail signs, a means for investors to know that something is afoot when a company's shares get under action. The most significant sign is the large Volume of transaction, large volume signifies more commitment. Only people who know will commit heavily. Within TA there are other indicators like Strength and Momentum, each having its literal significance. Strength suggests power, and Momentum suggests continued action. To augment these indicators there is Trendline which depicts the direction of the move. Another tool of TA is the charting of Candlesticks which records the status of transactions by the day. All these TA provide the TA expert a clear trail to get a step behind the initiator of a share price movement.
WatmoU1, when one knows the direction, the strength, the momentum and the scale of the movement of the share price of a company; that is what TA can reveal.
While TA highlights the footprints of the movements of share price, there is FA or Fundamental Analysis which is the study of the basic characteristics of the company, and VA or Value Analysis which pries and dissects the company to determine its intrinsic value. With FA, VA and TA, one is armed with the knowledge of the characteristics of a company, its value and the dynamics of the battle of the bulls and the bears. And over all these, if one uses LA or Logical Analysis, which skill one must possess, one can seize the situation when the opportunity arises; and that is the WHEN to BUY or to SELL.
After all this, is there a certainty that money can be made. Surely there is, but whether one will will depend on what one can do, will do, and does. However, there is a certainty that more people will lose than those will make. The Pareto principle will prevail.
When one does not lose that is good enough.
Ron
Every body wants to make money; many people know how to make money, but less people actually make money, because many more people know not how not to lose money. That explains why more people lose money than those who make money. Money is only made when an investor sells his shares for more than what he pays for them, that is, the returns exceeds the costs of the shares.
The paramount strategy to make money is to get others to lose money, a principle that is this simple. It is said that a fish will not get caught if it does not open its mouth to take the bait, and this baiting tactic is so evidently employed in the stock market all the time.
When a company makes profits it attracts attention, and when it shows its potential to make humongous profit in the future, it draws investors like ants to sugar; the reverse applies oppositely. This is fair if the company's intrinsic quality is as real as it appears, but this is very hard to tell, because lemons can sometimes be made to look like oranges. Suffice it to say, only those who have intimate knowledge of the company really know its true worth, all others know it by its propaganda. So, what do people really get for what they pay for; if it turns out fair they gain, if not they lose.
One of the most widely used instrument is called TA or Technical Analysis. TA identifies tell tail signs, a means for investors to know that something is afoot when a company's shares get under action. The most significant sign is the large Volume of transaction, large volume signifies more commitment. Only people who know will commit heavily. Within TA there are other indicators like Strength and Momentum, each having its literal significance. Strength suggests power, and Momentum suggests continued action. To augment these indicators there is Trendline which depicts the direction of the move. Another tool of TA is the charting of Candlesticks which records the status of transactions by the day. All these TA provide the TA expert a clear trail to get a step behind the initiator of a share price movement.
WatmoU1, when one knows the direction, the strength, the momentum and the scale of the movement of the share price of a company; that is what TA can reveal.
While TA highlights the footprints of the movements of share price, there is FA or Fundamental Analysis which is the study of the basic characteristics of the company, and VA or Value Analysis which pries and dissects the company to determine its intrinsic value. With FA, VA and TA, one is armed with the knowledge of the characteristics of a company, its value and the dynamics of the battle of the bulls and the bears. And over all these, if one uses LA or Logical Analysis, which skill one must possess, one can seize the situation when the opportunity arises; and that is the WHEN to BUY or to SELL.
After all this, is there a certainty that money can be made. Surely there is, but whether one will will depend on what one can do, will do, and does. However, there is a certainty that more people will lose than those will make. The Pareto principle will prevail.
When one does not lose that is good enough.
Ron
# posted by chunmu @ 9:09 PM 
