Why Do People Buy At A Top?

[eurusdzn]

It is probably better to buy the first new 52 week high rather than the last new 52 week high. The first one always looks excelllent on a chart. The last one doesnt look as good but three years later you can be sitting pretty.

 

[ElCubano]

buying the top is better than selling the bottom

 

[eurusdzn]

Quote from ElCubano:

buying the top is better than selling the bottom

I like to do both

 

[xelite777]

Quote from ElCubano:

buying the top is better than selling the bottom

That's quite the opposite El Cubano.

If you buy at the top (or what you believe is the top) your risk is limited because the stock (or the financial instrument you are trading) can only go to zero.

On the other hand, if you sell at the "bottom" (or what you believe is the bottom) you risk is now unlimited!

 

[kut2k2]

Quote from xelite777:

That's quite the opposite El Cubano.

If you buy at the top (or what you believe is the top) your risk is limited because the stock (or the financial instrument you are trading) can only go to zero.

On the other hand, if you sell at the "bottom" (or what you believe is the bottom) you risk is now unlimited!

You're assuming he's using the word SELL to mean entering a short trade rather than the standard meaning of exiting a long trade.

Retail forex has corrupted the language of trading.

 

[NoDoji]

Quote from xelite777:

Sure, any idiot can make money during an uptrend. But backtest that theory with 30 years of S&P 500 data and see for yourself...

Looks like we've been in an uptrend for a long time now:

http://stockcharts.com/freecharts/historical/spx1960.html

 

[xelite777]

Quote from NoDoji:

Looks like we've been in an uptrend for a long time now:

http://stockcharts.com/freecharts/historical/spx1960.html

Yes.

But buy every new 52 week highs on the major US indexes (S&P 500, Dow, Nasdaq, Russelll, etc...). since 1972 and see what happens.

 

[simonmarth]

george soros buyed put options! when the interest rates get down rated, the amrket crashes maybe.

 

[slumdog]

Quote from tradingjournals:

If you understand why people buy at a top, could you share it?

Stock runs from 10 to 30 and then back to 10.

30 was the top, you will laugh at the people buying at 30.

Buf if the same stock runs from 10 to 100 and then back to 10.

Anyone buying at 30 and selling at 90 will look like a genius.

Hindsight bias.

 

[mastacoli71]

Quote from tradingjournals:

If you understand why people buy at a top, could you share it?

psychological like everything else in the market. those that make money doing it are probably breakout traders that have a system when to take profits.

trading is not about taking a shot or throwing darts.