Trading Strategies  |  FEB 2009

How I Stopped Holding And Learned To Love The Death Cross by Greg Gazurian

How I Stopped Holding And Learned To Love The Death Cross by Greg Gazurian Check out this exit strategy, which may be what you need when a specific stock or market is weakening or bearish, compared to the (classic but not necessarily desirable) buy & hold strategy. Traditionally, buy & hold investors have sought to buy low and sell high to maximize returns. Although this sounds attractive, there are several problems in using only this approach in the stock market. One of the most common is the round trip, where the investor buys the stock at a relatively low price, holds the stock as it goes up, continues to hold as the stock loses the gains, until it returns to the price at which it was bought. Unfortunately, many investors have found themselves holding after the gains disappear and losses continue, hoping the stock will make a comeback. Some buy even more, regardless of the losses they are still holding, in a feeble attempt to offset the losses by buying when it’s inexpensive. This type of averaging down happens when emotions overtake logic, and it is usually for the worst. BUY & HOLD APPROACH Look at how the buy & hold investor begins to invest in the market. First, the investor must determine the current value of the stock. Fundamental analysis of a stock is the most commonly used method to gauge market value. One of the prerequisites for fundamental analysis is that the accounting data or financial outlook that the company provides is accurate and a reflection of the company’s business status for that reporting period.

by Greg Gazurian