Christopher Strudwick is a keen amateur share trader on the Australian Stock Market Visit his weblog for more free articles and useful information at http://www.asxnewbie.com
At Present there are Two Main Types of Investors. Which are You?
Have you ever sat back and really taken a good look at how the stock market operates? Or are you bewilldered, bedazzled or confused about the seemingly complexity of it all?
All it really takes is two people, we'll call them Investor 1 and Investor 2. In other words a seller and a buyer. This is the only thing that can make the share market work. You must have a buyer for every seller and vice versa. Without this nothing happens.
Now take the current market situation at present. Investors (Investor 1) fearing the worse have decided to sell off all their share holdings. Because of the large quantities of shares becoming available the buyer (Investor 2) can dictate at what price they are willing to pay for these stocks and as more stock becomes available the share price drops further still. Much to the delight of investor 2, whilst investor 1 sells off their stock at the best possible price they can get.
There comes a time when the selling panic subsides and share prices stabilise.Then a funny thing happens. There is a complete role reversal.
The previous investor, investor 1 now becomes a buyer and investor 2 who bought as the market was going down, now becomes a seller.
Now who is the most successful investor? Have you figured it out?
I believe its investor 2 as they bought stocks as the market decreased and then resold them when the market turned around.
Investor 1 invariably lost money as they panic sold and took what price they could.
Now the strategy that investor 2 possibly employed was that as they were in profit, they had employed stop losses ( conditional orders ) to lock in theses profits just in case a correction in the market occurred Which it did.
They had more than likely bought these stocks in the last downturn that happened not so long ago.
Now they can sit back and sell them to investor 1 at a profit who is now back in buying mode.
How often is this occurring? All the time and will continue to do so way into the future.
Who would you rather be? Investor 1 or investor 2?
The choice is yours.
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