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Showing posts from September, 2011

Market Crash... buy more or cut loss?

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Last few days, we saw the market having fun, crash like crazy, people panic selling like no tomorrow. Yesterday we saw US Dow Index down by 283 points, at the time I write this notes, it's down by another 350 points, Dow Index currently stand at 10,774. Many investors force to shake out in this volatile market with one of question in their mind, if the market go down further, should he continue to average down, or should he cut loss? . To a new investor, he will confuse, as many will suggest to “Cut Loss”, whereas, someone might say, no, it's time to buy more so that you can average down to reduce the cost. I think in order to do the right thing (let do not care if this's correct way or not), one must understand what's the purpose or intention when he bought the stock. Is it for short term speculating purpose? Or is it for long term investment purpose? Also, he may want to find out if the share he bought is mean for speculate or investing grade. . You should

Do you like the stable market?

In natural science, the balance environment always see something like this: Electron = Proton, or what we say, Positive is equal to Negative. . Similar in stock market, if nothing happen: Buyer = Seller In this case, technically the stock price will remain the same all the time. (this is boring ya, just imagine if a stock just remain the same price today, tomorrow or next year) Once a while, some kind of news will spark the imbalance, like what we faced in 2008, the financial crisis which caused few big banks to meltdown, making seller more than buyer. Sometimes, the seller became panic and want to sell stock like no tomorrow and dump the share price at what even price. . Recently, market seem to encounter the similar imbalance again. It's full of negative news every where. It remind me of one famous quote: It's a mistake to sell something worth 1 dollars for 50 cents with the hope to buy it back at 30 cents. It's also a mistake if you refuse to buy som

What cause the share price going down?

Every day, share price change up, down or stay side way. What cause the share price to change? In fact, nobody really know the answer, even the experience traders. Some special event, like financial crises, those experience know share price will go down, but they can not predict how much it will go down and when it will end. If you treat share as “goods”, most probably the supply and demand cause the share price to change. More buyer will create higher demand, then the price will going up. In the normal circumstances, demand = supply, hence share price will stay flat. In the event if the market is full of negative news, it create more seller, meaning supply more, the price is under selling pressure and tend to move down. The funny thing is, share is not something necessity, it's not something everybody need in daily life. Today's buyer can become tomorrow's seller. If a country spark a war, everyone will become panic as because they only want to hold cash. T