Let us assume the share market as vegetable market to understand the process of buying stock in a simple way. We enter the vegetable market same as share market. Some sellers we know personally and some we have never met. Based on our previous experience at the vegetable market we will know what is value buying. Unless we roam around and see the quality and price we will not decide what to buy, with whom to buy and how much to buy. Just because we have money in our pockets we won't buy everything whatever we see. For example , when we feel Tomatoes are best with seller 1, we negotiate for the lowest price we heard with seller 4. We don't buy with seller 4 as the quality was poor also we don't know him personally. In share market we can't negotiate for the price which is not under our control ,which is not one to one negotiation. But we can wait n predict based on previous graph. Wait till that particular stock comes to "value buying price "which we decide by research.
|Rotten Tomato is always cheaper but has no value|
What happens when we buy with seller 4 is we will end up paying hard earned money which is not worth. And we will have to regret later. Half of what we have got will be rotten on the way remaining half by next day morning. Even before we know , we will be at 100% loss. Same way if we buy a stock available at cheaper price even though the best were available for a little higher price, stock price may start falling immediately after we have got. We will panic as the application we use start showing alerts that "only sellers no buyers on NSE or BSE". Just because we made a wrong decision doesn't mean some one else will buy when we would like to sell.
|A bullish stock and a falling knife|
So better to think before we buy. A rare material with lesser competitors available for a higher price if we are very sure that the price will not go down even after years we can buy as we know with our previous experience the price has kept on increasing ,same pattern will continue in future then this is the best time to buy. As we have to pay more tomorrow for the same quantity.
A rare material is available for higher price with one or two sellers and we need it badly, then we go for it. Based on our previous experience price of the same material have kept on increasing. And will increase in the future too. Then this is the right time to buy if not have to pay more tomorrow for the same quantity.
A decision made at a right time leads us to profit.
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