Friday, January 20, 2012

Two unarguable facts

I don't care what anyone says about the market, the following statements cannot be argued against:
  • A company may have faultless fundamentals (based on information in the public domain), but if you are holding a long position in a downtrend, you will be losing money;
  • A company may have lousy fundamentals (based on information in the public domain), but if you are holding a short position in an uptrend, you will be losing money.
This is why I believe investors and longer term traders should always have regard to the current price action, and the direction in which price is travelling. By all means use fundamental data in your selection of stocks to trade and/or invest in, but by also watching the price action and the resolution of old trends, or the formation of new ones, you can 'time' your entries and exits much better. This also means your capital will be tied up for less time in a non-performing stock.

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