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Strategies & Market Trends : Due Diligence - How to Investigate a Stock
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To: MoonDog who wrote (105)3/30/1999 7:49:00 PM
From: EL KABONG!!!   of 752
 
Chuck,

Also I see LOL in many post, what does that mean? Is it Laugh out Loud?

Laughing out loud or lots of laughs...

Say I want to buy XYZ stock and its going up fast. Is the best plan to:
1. Send in a buy order at the bid even thoe the bid is going up fast.
2. Send in a buy at what you think the bid will be when it executes.
3. Send in a buy at market to try to get the best price.

The correct answer is that there is a fair price that you have predetermined that you are willing to pay for the stock. If the price is rising fast, make your best limit order price up front. You may still get shut out if the bid bypasses your price, but that doesn't matter anymore because the price has exceeded your perception of fair value. I have read of people on the boards here at SI that entered a market buy on an internut (thinking they'd get something reasonably close to the current price) and were shocked when they saw their execution at $40 or $50 higher than when they entered the order.

This strategy is only of interest to a short term investor. Long term investors stay away from stocks with current high volatility, preferring to buy when a stock is languishing rather than when it's a "hot" issue. It's much easier to determine a fair value based on fundamentals when the stock is depressed or on a plateau.

KJC
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