Why not to sell when price jumps: 1) Supply and
Post# of 75001
Posted On: 04/17/2015 9:55:15 AM
Why not to sell when price jumps:
1) Supply and Demand - The more shares that the longs can hold on to, the less shares are available for short sellers to grab. The more shares that the longs can hold on to make less shares available for purchase, which makes the supply low and the demand high. This helps to support higher prices.
2) Timing the Market - If your thinking "I'm going to sell at the peak and and then buy back when it drops", then here are my words of wisdom from my own experience. First, you're going to have a difficult time trying to identify the true peak (how high can it go?). Second, when you do feel like you are at the peak (or a comfortable exit point), you're going to put in a sell order and your broker is going to try to fill it. If your broker is bombarded with a lot of sell orders, he will have a difficult time getting yours processed right away. Also, the price will begin dropping with an abundance of sell orders. So now you need to accept a lower price in order to get your order fulfilled. So you lower your sell price, and the cycle repeats until you are chasing the dropping stock price to the bottom. Then you finally get the sell order to go through and the stock turns around and starts gaining in price. So now you need to buy it back at a low, so you put in a buy order and the broker is flooded with buy orders so he can't process it quickly. And the price keeps climbing and you need to accpet a higher buy price in order to get back into the game. Finally the buy order goes through at a higher price. And at the end of the day you've lost money and you have less shares than you started out with. So trying to sell high to buy back at a low can be tricky for small-time investors.
So hold on to your long shares. There will be another round of good news down the road and the upward spikes will continue several more times.
1) Supply and Demand - The more shares that the longs can hold on to, the less shares are available for short sellers to grab. The more shares that the longs can hold on to make less shares available for purchase, which makes the supply low and the demand high. This helps to support higher prices.
2) Timing the Market - If your thinking "I'm going to sell at the peak and and then buy back when it drops", then here are my words of wisdom from my own experience. First, you're going to have a difficult time trying to identify the true peak (how high can it go?). Second, when you do feel like you are at the peak (or a comfortable exit point), you're going to put in a sell order and your broker is going to try to fill it. If your broker is bombarded with a lot of sell orders, he will have a difficult time getting yours processed right away. Also, the price will begin dropping with an abundance of sell orders. So now you need to accept a lower price in order to get your order fulfilled. So you lower your sell price, and the cycle repeats until you are chasing the dropping stock price to the bottom. Then you finally get the sell order to go through and the stock turns around and starts gaining in price. So now you need to buy it back at a low, so you put in a buy order and the broker is flooded with buy orders so he can't process it quickly. And the price keeps climbing and you need to accpet a higher buy price in order to get back into the game. Finally the buy order goes through at a higher price. And at the end of the day you've lost money and you have less shares than you started out with. So trying to sell high to buy back at a low can be tricky for small-time investors.
So hold on to your long shares. There will be another round of good news down the road and the upward spikes will continue several more times.
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