Perhaps your research has shown that a company is an excellent purchase, but you can do a bit more analysis to get the best price to buy stock. You do not have to do this work. Your existing analysis has led you to conclude this is a valuable company and should increase in value over time. However, with any company, the stock will go up and down without seeming to reflect the true value of the company. You can take advantage of these market swings to increase your profit potential by finding the best price to buy stock. Effectively, you want to buy the stock at a discount if you possibly can do so.
This technique is the foundation of GOPM (Grow on Other People's Money)! If you buy a full position in this promising company, then you are employing a pure “buy and hold” strategy. To maximize your profit, you can buy at a bit of a discount and then when the time is correct, let your investment grow while preserving your capital.
The goal is to allow you to manage your money more prudently. You want to invest your money in this company when the price is going up. When the price is flat or moving down, though, you need to to have your money in another company that is moving up. By avoiding the natural downturns in the market, you will maximize your profits.
If you look at any company's stock price chart, you will see the price go up and then back down. What is the best price to buy stock? Would it not be better if you bought when it was in the valley than when it was on top of the mountain? Don't you think that the price at the bottom of a valley is the best price to buy stock as opposed to buying at the top of the mountain? Yes, you know that the current price is favorable compared to what it will do in the future, but the markets are not entirely objective, you need to take into account the natural motion of the market. In short, you want to pay the least you can for the company.
To do this, you will use the tools of a technical trader. There are investors in the market that do not care about the quality of the company at all. They use a set of mathematical tools to figure out if the price of the stock is going up in the short term or down in the short term. They buy or sell accordingly.
You do not want to be a pure technical trader. You only want to invest in the quality companies such as those identified on my Watch List, but you also want to use the technical trader tools to get the best price to buy stock.
Many articles or books will advise you against market timing. This is foolish. For most things that you buy, you look for a better price. When you buy a new shirt, you wait for it to go on sale. When you bought your car, you waited for the best rebate and probably went to several dealers to play one against the other. After Thanksgiving, you got up at 5AM to take advantage of the many sales. You went out the day after Christmas in search of bargains. In fact, some retailers even make promises that if you buy from them, they will guarantee the price for a certain number of days.
If you look for a bargain for everything else that you buy, why would you not look for a bargain in your investments? This is how you will use technical indicators, to try to get a bargain. You will not use indicators to blindly drive your investment behavior. Your goal should be to find the best price to buy stock so that your investment return is maximized.
If the adage for investing is "buy low and sell high" then it is perfectly logical to look for the best price to buy stock. My book, The Confident Investor, will help you to accomplish this goal. You can purchase my book wherever books are sold such as Amazon, Barnes and Noble, and Books A Million. It is available in e-book formats for Nook, Kindle, and iPad.
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