Greed or fear moves the market, or is it the other way around?
Fundamental market ups and downs are driven by human nature. It did not take any rocket scientists early in the last century for specialists and market makers to discover human nature. From there on, regular crashes happened due to greed which moves the market too high, resulting in the familiar scene of Black Tulip demise in the 18th century.
Once greed and fear concept in market making is understood. Your emotion is in control. You can reason out the market makers' actions. When money or stock runs out, the reversal is very quick.
So, when do you pick entry point of any stock? When will the lowest cost be presented to you on a platter? Above 6 cents, some might say? Anything below 6 cents is hopeless. Anything above 6 cents may by the will of god, be turned around some how? You have to be a business consultant then to invest in such risky stocks. Some do, I did and still do too.
Ordinarily, you do fundamental studies, then technical charting to look for entry point. To be sure of latest development you catch up with the latest news, and the industry news as a sector. If the company has a greedy new CEO(his greedy stock option), your chances of investment success improved. If the CEO announced a plan for stockholders' value; you are in like flint. If nothing at all, then check on the largest stockholder and see if you can ride on his coat tail? Then again, you have to have hair trigger to exit a wrong decision at 15% loss. Why 15% loss? Market makers generally pull back 30% when some one dumps the stock or their shorts went excessive. If you love the stock, you can buy back at 30% less, costwise.
Watch out for the saying "If you love the stock at $1; you love it even more at 70 cents". Your emotion will destroy your chances to make big money, when market makers pull back 70% or 90% from the peak. |
