Stock investing or trading depends merely on what kind of news there is in the stock market. Whenever there is good news the stock will rise and the stock will drop in price when negative news is on the screen.
Anybody who has not much affinity to stock investing or trading would agree to the above statement, as it makes sense and is reasonable.
Even some veteran stock traders and investors strictly cling to this principle. Surely, it is right that news concerning a stock affects the price direction. Anything related to the company of a stock is important for the future development of the stock itself. Thus, in the long run fundamental data is crucial for profiting in financial markets especially when doing stock investing.
But what about short term investing which is generally referred to as stock trading?
Well, even when doing stock trading it's still important to know what media is reporting about the stocks in the virtual account.
The only problem is that there are sometimes no news but the stock still makes severe movements to the up or to the down. And when this happens the stock market press and the TV tries to search everywhere possible to just find a justification for the hefty price change. Mostly, they find one reason and although it is not very convincing everybody is happy again and that was the purpose.
What I want to point to is this:
Stock prices change every day. Therefore, a stock analyst or the media must find a "reasonable" reason every day. But they can't because that is impossible as there are no reasons! At least no fundamental oriented reasons exist. It is ludicrous to assume that today the stock price rose because we had good news and tomorrow the stock price falls because the company's fundamental situation deteriorated again.
Stock prices change every day because there are buyers and sellers in the financial market. The question to be answered here is why market participants sell or buy. Market participants are no machines, they are human beings. As generally known humans are no rational beings. People are driven by emotions. And the biggest and strongest emotions in the stock market are fear and greed. These two factors are the main reason for a stock to fall or rise. That's it. No news or fundamentals.
What will we all see when someone cries out in the mass that there is a treasure at point X?
Everybody will run to that point without asking if it is really true. Consequently, this point X will rise in value as the there is only one spot but a horde of demanders. So, if you can get a small part of that point you can earn some money when waiting a bit and selling this spot to someone else.
Just do the same when looking at the stock market. Whenever a rise in volume (a lot of demanders) together with a rise in price is detected, buy this stock and hold it until you see a weakening in demand again. Better tip: Set a stop loss (a price where the stock will sold when hitting the stop loss price) after purchase of your stock. If you say that you can sell without setting a stop loss bear in mind that fear and greed are also dominating you!
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Jophan Celebi is an adept when it comes to stocks and options. He reveals information for the small investor or trader which is in most cases totally unknown to the majority. His e-book "Money Machine" covers the topic of how to understand and then use stock options because knowledge is the basis for success.
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