A beginners stock market question?

Question

I see it simple here:

When the stock value drops (a specific stock) I buy and when it goes up I sell it. By checking the monthly stock-price trend, it is easy to guess if the price will go up or down in the next few hours.

Is it that simple? What am I missing? Please no exaggeration just clear this out for me :)

Thanks a lot.

Answer 1

Stock markets do have a pattern as you listed . But it is irrational at most times. You cannot guess which way market will move next time. When it is in the bear mode every shares including good shares go down.

Answer 2

The part you're missing is the part where you say "it is easy to guess".

No, it's not. You'll be wrong just about as often as you're right. And what if the stock keeps going down? Do you keep buying and buying? What if you run out of money? Or what if you start to wonder if you're throwing your money into an ever-deepening pit? Or conversely, what if you sell all your stock in one company and then it keeps going higher, and higher, and higher ... what if you wish you still owned stock in it. Do you buy more? Or do you keep tossing your money into that pit we were talking about a minute ago ...?

See? Playing the market is anything *but* easy.

Answer 3

It's not simple.  Learning how to trade is similar to learning Calculus all on your own without a textbook - you just have to scrap things together and study them until you figure something out.

If you have found something, I congratulate you.  But, what is your plan for anticipating a monthly trend reversal?  I've been studying trading for about 4 hours per day for six months.  Do yourself a favor and guess the market direction for tomorrow, or for the next hour, etc.  See how you do.  If you are a trend-follower only, you will likely make money 2/3 of the time and get crushed the other time.

I can relate to you, though.  When I learned about the market, I thought I could just buy stocks during the summer, and let them run up for Christmas shopping.  It sounds absolutely hilarious now that I think about it.  

Good luck.  You can email me with questions if you like.

Answer 4

There are people every day trying this.... It's called day trading. Fewer than 5% of traders are profitable.

You could easily be correct on 5 trades & be wiped out by the next one. Most traders consider money management (stops and exits) the most important part of a trade.

As you start out in trading be assured that if you think you found an "easy way" to make money.... someone else already thought of it and has lost their account.

The few traders that make it in this business take an average of three years before they're really profitable. It takes skill & hard work to learn all that you need to be successful.

Most good traders are happy if they're winning 50% of their trades (as longs as their win loss ratio is better than 2/1).

Here's a rap-up of today's stock action;

http://www.alphatrends.net/

Check out;

http://www.mytrade.com/

http://www.tradingwithtk.com/

http://www.thekirkreport.com/

http://www.slopeofhope.com/

http://www.optionaddict.net/

Answer 5

No, you never know what the price is going to be next, trends might sometimes serve as guidelines but they don't really work. Try it out and see that you'll probably be wrong half the time, if you do it long enough.

Answer 6

Many factors influence stock price movement: news, whether or not earnings are going to be met, etc...but one factor is relative value...that is, whether or not a stock is more valued or less valued relative to its peer stocks...one of the best tools I have found that looks at this is on the web:

http://www.freestockvalueranker.com/

it looks at PE and PEG ratios relative to industry and sector peers...there is a link to an article on that site that will help you too...hope this helps...