Buy Stocks Low and Cheap
Edited by Leomar Umpad, Eng
I would like to thank Stock Sessions Courses for the awesome video on How to Buy Stocks / Buy Low & Cheap. I organized it into a wiki for anyone with a hearing impairment, or for those who just prefer to read the steps. Hope you enjoy it. :)
Let's talk about trends.
We'll do it one step at a time, little by little, how to analyze a company, how to look at its chart, how to find its trend, and how to draw trend lines. Let's go ahead and make it official. Let's talk about buying your first stock or buying whatever number of shares you've bought before. Let's talk about how to buy your stock.
Let's plan our strategy.
We have analysis, evaluation, and planning. Now we'll actually put it into work.
If you plan out your trades and keep a journal or a notebook and say what you're going to do.
Say, you're going to buy at a certain level, the company is good, and other reasons why you're buying. You'll probably do better than those who just do it because they heard a good stock tip.
Let's plan your first trade.
First, identify a good company with good earnings, check how the company does, how it makes money or if it is making money, and is it better than the competitor.
Identify the chart and uptrend.
If you see people doing this gesture on the trading floor, this means BUY.
This gesture means sell.
It's like you are pushing it away.
Let's discuss on the first things first.
Don't just rush to buy your first stock.
Do the work. Yahoo is a better tool. I prefer Yahoo as I have been using it since 1999-2000. I'm familiar how Yahoo Finance works.
Finding good companies you want to buy is step 1.
Don't just go to a chart, find an uptrend, and buy. That's not successful.
You need to have a hybrid approach combining some considerations.
Then go to your chart platform and find the trend.
Then let's get ready to buy on a pullback or breakout.
Let's define these terms.
An uptrend is the bottom left to the top right with higher highs and higher lows.
Let's go ahead and make it formal.
Would we buy Apple at $95 per share? Yes or No?
In the marketplace, some people would say, "Yes.
From an odds perspective, if you look through history and test this thing our multiple times, you'll find out that this pattern is an over-extension.
More often than not, the trend comes back down.
Buying at the top-most point is not scientific.
You need to buy at the pull back.
This is buying low.
Buy low, sell high. Buying low may pullback to a rising trendline.
That's how you quantify the word - LOW.
It is better to buy stocks in a pullback in an uptrend than just randomly picking stocks. Long means to buy or own the stocks.
If it's too far above, it does not mean it will come back.
It just means that it's too risky. It means that it probably will come back.
If it does a comeback, pullback, or shrink lower, then you will lose money.
That's not what we want. That's risky.
If the stock is coming down, trade is lower and people are selling, then keep it close.
Put it on a watch list. Print the chart out. When it hits a particular price on a particular day, buy it.
There are different programs you can use to set watchlists.
Some of the programs may actually send a text message to tell you that the stock is at the desired level so you can go ahead and buy it. Sometimes programs email you.
There are many advantages to buying near a trendline.
We won't go to all of them to keep this simple.
Let's talk about the exact moment when to buy.
There really isn't an exact moment where it's perfect for all the stars to align, planets come together, and all of those fun stuff. It does not exist - unfortunately.
You have to decide whether you want to be an early buyer or a late buyer.
You have to make a decision and you need to do it consistently.
We don't know what is about to happen next.
This is a stock trading up and down and it's hitting the trendline. We do not know what is going to happen next.
Probably, if history is a guide, it will trade up off the trendline.
If it falls under, you need to sell your stock but let's not talk about that right now.
If you are alert when it comes down or touches close to your trendline, you would buy the stock.
It really is as simple as that.
We will talk about it later about execution and orders, how to use the platform and all that.
This is the thesis or theory on how to do this.
This is not going to happen on your actual exact spot unless you set an alert as it rises up on the trendline.
There are advantages to waiting.
What happens if the price hits the trendline and just shatter it. We lose money in that case.
Sometimes you have to make your own decision as an investor.
Wait for the price to touch the trendline and then start rising up.
If it rises up, it has actually better odds of keeping higher.
We can actually buy on breakouts.
This is something people don't normally do because we are told to buy low on the trendline and sell high where the price is way above.
We can actually buy breakouts.
It shows how the company is that buyers are willing to pay a higher price to bid or push the price higher.
Think about a house.
If you try to sell your house and nobody wants your house. You can sell it for S200,000 because nobody wants it. What happens if 3 people want that house? They want your house or $200,000.
Would you just pick someone randomly?
You say $210,000. If there are still 2 people, you raise your price to $220,000.
If the 2 people keep on fighting with each other due to both not giving up on the house, you can keep raising the price.
Some may say that it is too much.
It's the same thing happening in here.
That's buying on a breakout because we a lot of people are competing to get those shares.
Believer it or not, there's a fixed number of stocks.
You can't just print stock as there's a fixed number. That's why price moves up and try another reason. Breakout is another spot to buy.
That is even simpler because that's just going above a prior high or trading rapidly higher.
For those who do not like to do that and prefers using the trendline, I'm showing you 2 trendline touch trade in the stock at Apple.
I'm showing you the different ways to buy.
Google is arguably a good stock with a competitive advantage that makes money. If you are a "buy low" trader you would buy where I've labeled all these green spots on the trendline. You would just buy hoping that it does not grow under it. If it does, then sell.
If you are more aggressive, or you just can't wait to buy the house and share.
You would pay up to enter. You would pay a higher price.
Notice what happens each time the pullback occur - the price kept going up.
Let's put it into perspective.
Start your search for your stocks. Look at your chart for reviewing the trend.
Study the trend.
Figure out if it is an up or down; or the more common Mysterious Sideways trend. Buy the market stocks with whatever you want to put on your portfolio.
Buy the stocks that are those on the uptrend.
I would discuss this again - consider trading which is buying at a low level and selling at a high because there really isn't a trend.
Video: Buy Stocks Low and Cheap
Recent edits by: Leomar Umpad