Saturday, October 3, 2009

Why you want to buy a stock now?

When you heard about Dow fell 203 point, would you rush in to buy?

If most people think the answer is yes, then you will noticed the Dow index close higher on October, especially the first two days. However, this is not the case, it's probably good time for those trader to log in some profit right now and wait for one to two weeks for more clearer direction.

For those who want to buy a stock for investment now, may be you need to ask a question why you want to buy a particular stock. A proper plan need to develop, don't wait until its price goes up or down to think about it. Many investor not sure why they bough a stock, so when the price down suddenly, they are not sure what to do next.

Every investor and every stock present different indicator or reason, one need to carefully consider before open the position. Just ask yourself if now the stock fairly value? What's the price would you want to sell and the reason is due to stop loss or the company report lower quarterly profit?

In weeks to come, perhaps we will find a stock used to trade at 50 now drop to 40. Is it a good buy now? May be yes or no. Buying stock that look cheap maybe is not a good idea, as usually we tend to catch a falling knife. It's always better do nothing and let it going down until it touch the floor, let the price stable and start to rebound, then buy it with proper trading strategy plan in place.

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