Wednesday, September 3, 2008

What I am reading today on a holiday

Behind the Headlines gives some humor to market terms:
Daytrading: - an activity that takes place in between meaningful periods of employment.
Fundmental analysis: – a method of analysis that provides compelling reasons for why a stock shouldn’t fall in price when it does.
“Fundamentally sound”: - the condition in which an economy finds itself immediately after a stock market collapse.
Market report: - a concise explanation of why a market traded up or down. 99% of market reports are drawn from other market reports. The remainder are whimsical.
For more such insights, read the Blog mentioned above.
The Aleph Blog says:
During crises, assets shift from weak to strong hands, from the weakly capitalized to the strongly capitalized. .... (Warren Buffet) was prudent during the boom phase, and let others do deals at imprudent levels while he watched, sat on cash, .... Sitting on financial slack (cash) is tough during the bull phase. You look dumb when other seem to be making easy money.... But, if you have excess purchasing power in the bear phase, how delightful it can be.
My Notes: This is a principle that applies as well to trading. If Markets are in euphoria, the trader has one more option. He can stay away, keep his cash to himself. Many a time I say on CNBC, "Wait patiently. Buy only on a dip". If you miss the move, so be it, there will be hundreds of such moves every year. The electronic media creates the impression of 'Now or Never'. But this is only an impression, the reality is quite different. Investors and traders who take care of their money without getting swayed are big winners in the long run.

1 comment:

Anant Gopal Khadilkar said...

Could we summarise this phenomenon as - BUY when every one else is SELLING and SELL when all others are rushing to BUY?