Stock trading tips - trading expectations

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Stock Trading Tips
-
Mind of a Successful
Trader

Disclaimer
Stock trading is VERY risky.
Learn before you trade.
This is not investment advice.
Consult qualified investment professionals.
Do not trade with more than you can afford
to lose.
No warranties here, you are on your own.

When you look at stocks long
enough, you start to see the
huge role that expectations
play in stock valuation.

Sure you have supply and
demand, sure you have
fundamental valuation, but
both of these are greatly
affected by expectations.

If the market expects great things from
the stock, the stock sells at a high price
and it is easy for the company to raise
money at less expense.
The company prospers from cheap
financing and the fundamental value of
the company increases - even if at first,
the expectation was wrong.

Let me show you....
If you hold the stock you are
part of the supply.
If you expect the stock to go
up, you do not sell.
If you expect it to go down,
you are likely to sell.

Conversely, if you are an investor who
might buy the stock, you are part of the
demand side of the equation. If you
think the stock will soon skyrocket and
everyone knows this, you buy with both
hands, taking all the offers you can find.
If you believe nobody knows this, and
the stock may decline before rising, you
hold off buying. This much is obvious.

Now look at how expectations
can be used to affect the
fundamental value of the
company.

If you are an evil naked short
seller, you can hire people to
"bash" the stock with slander,
pushing the price so low that no
matter what the true value of the
company could be, the company
is unable to finance itself by
selling equity and so dies.


In this type of situation, the
expectation can exceed the
reality and become the
reality.

Now we dig deeper
We also have the theory of contrarian
investing. This says that if everyone
is bullish, sell. If you are a
contrarian and everyone is bearish,
buy. The contrarian prospers by
doing the opposite of expectations.
How can this be?

What you actually have to do
is to know the underlying
value and look at the
expectations that are out
there and play one against
the other. How will their
relationship change?

If the stock is undervalued,
and all are bearish, can you
see expectations shifting to
bullish some day?

If the stock is wildly
overvalued, no amount of
bullish expectation will make
it a good investment; in fact it
is probably a good short sale.

As the trick in investing is to
find the most undervalued
stock that will soon become
overvalued, I recommend
looking through areas others
would not touch for
overlooked value.

Some stocks may stay undervalued
and overlooked forever, so you try
to weed them out. You collect all the
undervalued stocks and then see if
there are factors there that will
cause them to gain positive
expectations.

If there are such factors, you
engage in more research and
find the best of these, study
the market, and pick your
entry strategy.

Discover more free at
Investing-Performance.com

or

Get “How to Find a Home Run
Stock” Or
“How to Pick Hot Reverse
Merger Penny Stocks”
on Amazon.com

Stock trading tips - trading expectations

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