We always keep hearing in the stock market that this stock is having lot of value because it will produce so and so much no. on this and this quarter & year, growth is intact for the stock and too many other logic; people should also keep adding stock into their portfolio at lower prices too because the company is having a bright future or belongs to best group in the business world.
But it could be a very dangerous style of investment if you do not find out whether a particular stock is in downtrend or uptrend; only one wrong ignorant trade simply may erase all your capital or make you frustrated for a very long period of time without moving much from your buying price which means an opportunity cost for you even your stock considered as big boy of the market.
The price movement of the stock do not discriminate between a very good or bad company.They will move in the direction whether strength will be strong without bothering much about the other factors.
The best example in recent past is Bharat Heavy Electricals Limited which called a Navratna (blue-chip) company of Government of India. One of my friend bought the stock of the BHEL at around Rs.350 level with the same mindset that it is a very good company. The stock started going down and has broken down 15% in no time and again he started averaging out with the same concept that this is a blue-chip company and stock cant go down much. But stock without bothering about it's so called credential keep going down till the sub level of Rs.180 within the time period of two year which is 50% down from the buying price of my friend. Two year has passed from then, he lost around 50% of his investment and even today keep hoping that he will get back his price in coming days because stock belongs to a blue-chip company.
We all make losses in the market but keep clinging on to any loss making stock because it belongs to a very good company can not ever be a sane idea. Rather than going for the value, if he would had checked it down when he was buying the stock that whether it is in uptrend or downtrend and used a proper stop loss strategy then for sure he would not had made such a colossal loss on his investment and also had money in his hands to invest whenever there was better opportunities.
So my point is that you should buy a stock based on its price movement not because it is a company of Ambanis or Tata's or going to produce this and this numbers.Because for stock market; the price is only thing which is real and all the other things are good for brain storming.
But it could be a very dangerous style of investment if you do not find out whether a particular stock is in downtrend or uptrend; only one wrong ignorant trade simply may erase all your capital or make you frustrated for a very long period of time without moving much from your buying price which means an opportunity cost for you even your stock considered as big boy of the market.
The price movement of the stock do not discriminate between a very good or bad company.They will move in the direction whether strength will be strong without bothering much about the other factors.
The best example in recent past is Bharat Heavy Electricals Limited which called a Navratna (blue-chip) company of Government of India. One of my friend bought the stock of the BHEL at around Rs.350 level with the same mindset that it is a very good company. The stock started going down and has broken down 15% in no time and again he started averaging out with the same concept that this is a blue-chip company and stock cant go down much. But stock without bothering about it's so called credential keep going down till the sub level of Rs.180 within the time period of two year which is 50% down from the buying price of my friend. Two year has passed from then, he lost around 50% of his investment and even today keep hoping that he will get back his price in coming days because stock belongs to a blue-chip company.
We all make losses in the market but keep clinging on to any loss making stock because it belongs to a very good company can not ever be a sane idea. Rather than going for the value, if he would had checked it down when he was buying the stock that whether it is in uptrend or downtrend and used a proper stop loss strategy then for sure he would not had made such a colossal loss on his investment and also had money in his hands to invest whenever there was better opportunities.
So my point is that you should buy a stock based on its price movement not because it is a company of Ambanis or Tata's or going to produce this and this numbers.Because for stock market; the price is only thing which is real and all the other things are good for brain storming.