To: LionHeart who wrote (5754 ) 7/23/1998 8:40:00 AM From: ISOMAN Respond to of 11684
Normally , If you like a company, but you believe it will tank for awhile, You first sell your shares at the current bid. Then you wait for it to drop . and then you re buy into the stock, only this time you get more shares because of the lower price. The end result in theory is that the extra shares will more than make up for the drop in price, and the commissions paid. Plus you avoid the extra loss in value on the way down. For example. You buy ZXYZ at 50 cents. You purchase 10,000 shares. All of a sudden an evil cartel of canadian Bashers , hired by a sorting Market Maker, come on your favorite stock thread and start mahem and panic. The price drops to 45 cents. You $5000 investment is now worth $4500 So you sell and put the $4500 in a money account and wait. 3 or 4 weeks go by and the Cartel has successfully hammered it down to 15 cents. Out comes the $4500 in the bank and you put in an order to buy 30,000 shares . (you had an extra $50 in you lunch money fund and spring for the commission) Now you have 30,000 shares instead of the origional 10,000. now the stock need only go to 16.5 cents in price to recoup your origional investment. plus should it return to the origional 50 cents you first bought in at, you would have $15,000. --------------------------------------- Now, someone is going to post "how do you know it will continue down" You don't. This is where experience comes in. Someone will post. "Hoe do you know it will go up again in value from 15 cents" You don't remember, I said, that you believed in the company, it is just a downturn at the time. Plus, if it isn't going to rebound, wouldn't you rather take the $500 loss at 45 cents, then the $3500 loss by holding until it drops to 15 cents.