# How do you pick stocks with an emerging trend?



## CrazynWild (10 May 2009)

Hi Wonderful People

I am a newbie and have been surfing on this forum for some months to educate myself. 

First of all I would like to thank some really good people here who really make time to post some valuable stuff to assist people like myself.

In today's world when most of the time things are going wrong, I decided that may be its a time to put Plan B in place for my income stream instead just relying on the day job, so I started to look into investing some money in shares.

After my research I soon realised I have 2 options in share investing i.e. Long term investing or Share trading. 

I decided to go for Share trading than Long term investing.

I have read few books on Share trading and have come to realise the strong co relation between Supply and Demand, Price, Volume, MACD and DMI.

For now I personally would like to just focus only on shares yet I do see people talking about CFDs and Futures quite a lot when it comes to trading.

The situation is I do not want to spend too much money in accumulating different resources such as Charting softwares etc while I am learning so I thought I'll come here for help.

I have downloaded Incredible Charts Pro and Trial version of Amibroker and after reading few posts here I have noticed that you got to be bit of Software genius ( which I am not) to get these softwares working for you.  

My first question is how do you pick the stocks where trend is about to emerge or initiate?

My second question is, can someone will be kind enough to help me to become expert on finding stocks by using Incredible Charts Pro or Amibroker, based on MACDs and DMIs, hence I am asking basically step by step guide to assist me with one of these softwares using only MACD and DMI indicators for now until I build my knowledge and confidence.

I have tried to read the User guides for these softwares but can't get my head around to them as yet.

I would be grateful if some experts can take some time to help me out and post reply to this post so slow learners like myself can learn from it.

Many Thanks in advance.

CrazynWild


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## RamonR (10 May 2009)

Hi Crazynwild

Can't answer the specifics questions you have asked. I wanted to add that essentially I am in the same situation but I have decided to focus on Long term investment instead.

I have borrowed for my portfolio but it is positively geared.

I am doing some trading but that is only amongst the shares I have in my portfolio as I know them the best and also div yield being very high on my list of criteria for holding them if something went wrong with my trading I could convert them to long term holds.

Essentially what I am trying to say is that you can trade in any market but it is rare that you can borrow to build a portfolio and have it positively geared.


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## sandybeachs (10 May 2009)

CrazynWild said:


> Hi Wonderful People
> 
> I am a newbie and have been surfing on this forum for some months to educate myself.
> 
> ...




Hi Crazynwild

one of the most complexed posts i've seen from a newbie, you cover a number of issues.

so i'll try and help you out with a couple of things.

1) Trading, any share trader now a days needs the best of the best systems available.

2) Very important you use a "Dynamic Live System" for example Power E*Trade, which gives you access to WebIress. This gives you live trading as it's happening on the ASX.

The benefit with the above is you don't need too keep refreshing your screen so you can keep up with what's going on.

3) i use software called Marketscan by Paritech. IMO it's a 5 star software product, but it does take sometime/patience before you can grasp how things operate and using your own predefined searches.

4) lastly i wouldn't be throwing your own money on the table until you fully appreciate trading, therefore as the saying goes "Practice Makes Perfect".

how ever long it takes start off with monopoly money so you can get a feel what it's like losing money or perhaps making money.

i honestly believe it takes at least 1 year before you've become extremely familiar with trading.

well i've covered a couple of things which i hope gives you some guidance and remember daytrading can be very very dangerous.


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## simoncar (10 May 2009)

I could easily tell you how to find emerging trends. I could easily tell you how to be consistently profitable in the markets. I may have only had a few posts on this forum but that is for a reason. I am now consistantly profitable and feel able to contribute back to this forum that I learnt so much from. I stopped posting on this forum and went to work. I spent about 8 hours a day for the last 3 years looking at thousands of stock charts. This is no exageration. You must perform extensive study of money management and of trading psychology. Get yourself a charting program, pour over thousands of charts and you will start to see the same patterns emerge time and time again. *You* must then work out a strategy for how YOU would trade these. If you do not design your own strategy for how you would trade these patterns then you will not be comfortable doing it and will be strongly tempted to break the rules imposed by the other persons strategy.

Simon


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## MichaelD (10 May 2009)

1. Read better books. I suggest Trading Your Way To Financial Freedom by Van Tharp would be a good start.

2. Ignore the bad advice in posts 2 and 3.

3. Read carefully the good advice in post 4.


Oh, and how do you pick a stock which is about to trend? You can't. You can, however, easily spot a stock already trending by showing the chart to a 3 year old and asking if it is going up or down.


(As an aside, is this sudden explosion of newbie interest in the stockmarket 1/ a sign that the end is nigh, or 2/ a sign that a new bubble is inflating)?


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## awg (10 May 2009)

CrazynWild said:


> Hi Wonderful People
> 
> 
> My first question is how do you pick the stocks where trend is about to emerge or initiate?
> ...





I am not an expert.

If you plan to "trade"

Q1)...easy to do using SCANNER in Incredible Charts, program software to search for stocks breaking Moving Averages in last 5 days + Volume Spike (a simple for instance)

Q2)..you really have to read the educational/instructional material that comes with the IC site...it gives examples of the indicators and their applications.

Further detailed study can be undertaken on the net, or buying books.

IC is very user friendly, if you cant use it, you are unready to commence trading.

The experienced posters on this site may say, that you are unready until such time as you have a demonstrable back tested strategy, live-tested on a demo account. IMO the case is that you will almost certainly lose money, if you commence trading prior to acquiring skills, unless the market is rising, which can then engender overconfidence in itself 

Amibroker takes more time and knowledge to understand, you will need to persist, it is relatively inexpensive.

You may wish to open a demo trading account or at least paper trade, for a fair while, before you over-commit real cash

happy learning, there are no shortcuts


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## simoncar (10 May 2009)

In response to MichaelD's post. Read Van tharps book...then read it again....then read it again....then read it again. I read this book when I started to trade and I thought I understood all in it. When I read it now I realise how much I didn't. It is possibly the best book on trading written IMO. You can get on board stocks that are about to trend....just look at thousands of charts and see what patterns pre-empt a great trend. Then work out a *low risk *way of entering. You will win some and you will lose some.....this is how trading works. When you lose some...don't lose much. When you win some...make sure you win alot more than you lose. Result you make money. Although this is not the aim of trading. The aim of trading is to preserve your trading capital. If you can do this you will have money to trade with and become profitable when you work out how the game is played successfully. This in my case took 3-4 years. And guess what that is about 2 years longer than I thought it would as I thought I was pretty intelligent.


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## craigj (10 May 2009)

as a fellow newby i am having success  following sectors that are trending upwards and picking some stocks in that sector

recently oil and copper plays have been rising sectors so have bought into some of these stocks for gains


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## It's Snake Pliskin (10 May 2009)

craigj said:


> as a fellow newby i am having success  *following sectors that are trending upwards and picking some stocks in that sector*
> 
> recently oil and copper plays have been rising sectors so have bought into some of these stocks for gains




That's what Jessie Livermore did.


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## ceasar73 (10 May 2009)

simoncar said:


> In response to MichaelD's post. Read Van tharps book...then read it again....then read it again....then read it again. I read this book when I started to trade and I thought I understood all in it. When I read it now I realise how much I didn't. It is possibly the best book on trading written IMO. You can get on board stocks that are about to trend....just look at thousands of charts and see what patterns pre-empt a great trend. Then work out a *low risk *way of entering. You will win some and you will lose some.....this is how trading works. When you lose some...don't lose much. When you win some...make sure you win alot more than you lose. Result you make money. Although this is not the aim of trading. The aim of trading is to preserve your trading capital. If you can do this you will have money to trade with and become profitable when you work out how the game is played successfully. This in my case took 3-4 years. And guess what that is about 2 years longer than I thought it would as I thought I was pretty intelligent.




Good stuff Simon - can you give more info on the patterns that pre-empt a great trend?

cheers,

ceasar73


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## simoncar (10 May 2009)

Caesar, usually for a stock to have a great run to the upside it needs to form a solid base. This involves a sideways consolidation for a cosiderable length in time depending on the time frame to be traded. When you see this it is a sign that the smart money has been accumulating the stock therefore stopping either its downside run or stopping it from travelling lower.


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## simoncar (10 May 2009)

Like I have said before, study thousands of charts. This has been easy for me as I absolutely love doing it. After time you will notice many many things. You will see breakouts and retracements and revesals and consolidations.  Work out what pre empts all these things. Look at the volume when certain things happen. Never use indicators. Never use indicators. Never use indicators. They will distract you from what is the most important thing. Despite what anyone says, they are useless. All the answers lie in the price and the volume. Basically work out if A. happens then B. usually happens then C. follows. Then you have to understand that the market will go whatever way it chooses after you enter a position,and all your analysis could be wrong. So don't try and be right and wait for the stock to turn around and move higher. Exit for a relatively small loss and move on to the next trade. Stocks move in waves....learn how to catch a wave and get off when it ends. Work out a strategy that suits you. I trade off weekly, daily and hourly charts...because they all suit my timeframes of choice. But these are not nearly the most important aspects of trading. Understanding your psychology, understanding position sizing and understanding risk management are. Study lots of charts, read some books on money management and position sizing, some on psychology and over time the questions you will be asking will be answered. 
I read many a post like this when I first started trading but it didn't sink in. I just wanted to know when I should enter a position. Give me the entry!!! Yes the entry is important but managing your trade after entry is soooooo much more important.


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## beamstas (10 May 2009)

> Caesar, usually for a stock to have a great run to the upside it needs to form a solid base. This involves a sideways consolidation for a cosiderable length in time depending on the time frame to be traded. When you see this it is a sign that the smart money has been accumulating the stock therefore stopping either its downside run or stopping it from travelling lower.




This one may interest you


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## ceasar73 (10 May 2009)

thnx simon


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## ceasar73 (10 May 2009)

simoncar said:


> Like I have said before, study thousands of charts. This has been easy for me as I absolutely love doing it. After time you will notice many many things. You will see breakouts and retracements and revesals and consolidations.  Work out what pre empts all these things. Look at the volume when certain things happen. Never use indicators. Never use indicators. Never use indicators. They will distract you from what is the most important thing. Despite what anyone says, they are useless. All the answers lie in the price and the volume. Basically work out if A. happens then B. usually happens then C. follows. Then you have to understand that the market will go whatever way it chooses after you enter a position,and all your analysis could be wrong. So don't try and be right and wait for the stock to turn around and move higher. Exit for a relatively small loss and move on to the next trade. Stocks move in waves....learn how to catch a wave and get off when it ends. Work out a strategy that suits you. I trade off weekly, daily and hourly charts...because they all suit my timeframes of choice. But these are not nearly the most important aspects of trading. Understanding your psychology, understanding position sizing and understanding risk management are. Study lots of charts, read some books on money management and position sizing, some on psychology and over time the questions you will be asking will be answered.
> I read many a post like this when I first started trading but it didn't sink in. I just wanted to know when I should enter a position. Give me the entry!!! Yes the entry is important but managing your trade after entry is soooooo much more important.





never use indicators..interesting!
simon you recomend van tharp, many in this forum have said weinstein.what are your thoughts on weinstein?

thanks again.


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## matty2.0 (10 May 2009)

wait for a double or triple pop .... then you know it's about to explode like a volcano ...


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## simoncar (10 May 2009)

Weinstein stuff about the 4 stages of a stocks life is worth looking up and then conducting some of your own research on for sure. I have looked into his stuff about the 4 stages and it does have its place in my trading strategy.


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## kam75 (16 May 2009)

How do you pick stocks with an emerging trend? 

1. Volume, volume volume volume volume.
2. Higher-highs, higher lows
3. New breakouts
4. OBV rising.
5. And volume


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## sleepy (16 May 2009)

simoncar said:


> *I stopped posting on this forum and went to work. I spent about 8 hours a day for the last 3 years looking at thousands of stock charts.* This is no exageration. You must perform extensive study of money management and of trading psychology. Get yourself a charting program, pour over thousands of charts and you will start to see the same patterns emerge time and time again. You must then work out a strategy for how YOU would trade these. If you do not design your own strategy for how you would trade these patterns then you will not be comfortable doing it and will be strongly tempted to break the rules imposed by the other persons strategy.






simoncar said:


> In response to MichaelD's post. *Read Van tharps book...then read it again....then read it again....then read it again. *I read this book when I started to trade and I thought I understood all in it. When I read it now I realise how much I didn't. It is possibly the best book on trading written IMO. You can get on board stocks that are about to trend....just look at thousands of charts and see what patterns pre-empt a great trend. Then work out a *low risk *way of entering. You will win some and you will lose some.....this is how trading works. When you lose some...don't lose much. When you win some ...*make sure you win alot more than you lose.* Result you make money. Although this is not the aim of trading. *The aim of trading is to preserve your trading capital*. If you can do this you will have money to trade with and become profitable when you work out how the game is played successfully. This in my case took 3-4 years. And guess what that is about 2 years longer than I thought it would as I thought I was pretty intelligent.






simoncar said:


> *Caesar, usually for a stock to have a great run to the upside it needs to form a solid base. This involves a sideways consolidation for a cosiderable length in time depending on the time frame to be traded. When you see this it is a sign that the smart money has been accumulating the stock therefore stopping either its downside run or stopping it from travelling lower.*



*



simoncar said:



Like I have said before, study thousands of charts. This has been easy for me as I absolutely love doing it. After time you will notice many many things. You will see breakouts and retracements and revesals and consolidations.  Work out what pre empts all these things. Look at the volume when certain things happen. Never use indicators. Never use indicators. Never use indicators. They will distract you from what is the most important thing. Despite what anyone says, they are useless. All the answers lie in the price and the volume. Basically work out if A. happens then B. usually happens then C. follows. Then you have to understand that the market will go whatever way it chooses after you enter a position,and all your analysis could be wrong. So don't try and be right and wait for the stock to turn around and move higher. Exit for a relatively small loss and move on to the next trade. Stocks move in waves....learn how to catch a wave and get off when it ends. Work out a strategy that suits you. I trade off weekly, daily and hourly charts...because they all suit my timeframes of choice. But these are not nearly the most important aspects of trading. Understanding your psychology, understanding position sizing and understanding risk management are. Study lots of charts, read some books on money management and position sizing, some on psychology and over time the questions you will be asking will be answered. 
I read many a post like this when I first started trading but it didn't sink in. I just wanted to know when I should enter a position. Give me the entry!!! Yes the entry is important but managing your trade after entry is soooooo much more important.

Click to expand...



Nice posts Simon .... Excellent advice!

sleepy *


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## Uncle Barry (16 May 2009)

Good evening Simoncar, 
Mate this is the most honest and square of the chin advice I have ever seen, and I've only been in this business for about 20 years or so.
--------------------------------------------------------
"Like I have said before, study thousands of charts. This has been easy for me as I absolutely love doing it. After time you will notice many many things. You will see breakouts and retracements and revesals and consolidations. Work out what pre empts all these things. Look at the volume when certain things happen. Never use indicators. Never use indicators. Never use indicators. They will distract you from what is the most important thing. Despite what anyone says, they are useless. All the answers lie in the price and the volume. Basically work out if A. happens then B. usually happens then C. follows. Then you have to understand that the market will go whatever way it chooses after you enter a position,and all your analysis could be wrong. So don't try and be right and wait for the stock to turn around and move higher. Exit for a relatively small loss and move on to the next trade. Stocks move in waves....learn how to catch a wave and get off when it ends. Work out a strategy that suits you. I trade off weekly, daily and hourly charts...because they all suit my timeframes of choice. But these are not nearly the most important aspects of trading. Understanding your psychology, understanding position sizing and understanding risk management are. Study lots of charts, read some books on money management and position sizing, some on psychology and over time the questions you will be asking will be answered. 
I read many a post like this when I first started trading but it didn't sink in. I just wanted to know when I should enter a position. Give me the entry!!! Yes the entry is important but managing your trade after entry is soooooo much more important. "

Thanks again, EVERYBODY should read your advice !
Kind regards,
UB


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## PeterJ (16 May 2009)

Simon and Kam75's posts

are the two of the most important on this forum

*IF* you want to be successful  at trading 

Peter


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## It's Snake Pliskin (16 May 2009)

PeterJ said:


> Simon and Kam75's posts
> 
> are the two of the most important on this forum
> 
> ...




Hello PeterJ,

Why are their posts the most important on this forum? Could you elaborate as to why you see it that way?


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## ceasar73 (16 May 2009)

PeterJ said:


> Simon and Kam75's posts
> 
> are the two of the most important on this forum
> 
> ...




Agree 100%...I get the feeling these two guys know their stuff.

ceasar73


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## Nero64 (16 May 2009)

CrazynWild read Master the Markets to learn about price and volume. 

Simoncar do you leverage with CFD's or just use plain equity unleveraged?

Is Trading your full time occupation?


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## PeterJ (17 May 2009)

Snake IMO they are two of the most important, not the only ones 

to help you make money, which is what it is all about i believe.

and that advice will help get you there quicker

Volume and rising On Balance Volume are critical for a stock to rise

example attached

cheers 

Peter


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## simoncar (17 May 2009)

Hi Nero, yes I leverage with CFD's but I make sure I stick to my risk parameters. The main reason I use CFD's is the cheaper brokerage and the ability to go short. I don't trade full time as I don't have to. I have a great job I love, as a full time firefighter, and as this involves shiftwork it gives me plenty of time to trade. Although time wise I spend more time trading than at the fire station! So I'm not sure which one is my primary job and which  is my secondary. Sorry....when I say trading I am not actually buying and selling all the time....it may involve reading a good trading book, studying charts etc. I have designed my trading system to fit into my lifestyle and to fit my personality. Looking back on my posts I feel I left out an important bit of advice. I will use daily charts as an example...open up a chart from your charting program to the current date. Now go back in data (time ) as far as you can. Now progress forward day by day. Try and predict what price may do the next day. This is how I learnt. This is the best way I know of to try and perfect your trade management too (you will never perfect it by the way). I do this walk forward testing until I see a set up for entry. Then I would say to myself....buy at this point with an initial stop at this point....then I would go forward day by day hypothetically managing my trade. IMPORTANT.... you won't find a way that works all the time..you just need to find a system that works *reasonably* well *most* of the time.


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## It's Snake Pliskin (17 May 2009)

PeterJ said:


> to help you make money, which is what it is all about i believe.
> 
> and that advice will help get you there quicker



What it is all about, is what? And get where quicker?


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## ceasar73 (18 May 2009)

simoncar said:


> Hi Nero, yes I leverage with CFD's but I make sure I stick to my risk parameters. The main reason I use CFD's is the cheaper brokerage and the ability to go short. I don't trade full time as I don't have to. I have a great job I love, as a full time firefighter, and as this involves shiftwork it gives me plenty of time to trade. Although time wise I spend more time trading than at the fire station! So I'm not sure which one is my primary job and which  is my secondary. Sorry....when I say trading I am not actually buying and selling all the time....it may involve reading a good trading book, studying charts etc. I have designed my trading system to fit into my lifestyle and to fit my personality. Looking back on my posts I feel I left out an important bit of advice. I will use daily charts as an example...open up a chart from your charting program to the current date. Now go back in data (time ) as far as you can. Now progress forward day by day. Try and predict what price may do the next day. This is how I learnt. This is the best way I know of to try and perfect your trade management too (you will never perfect it by the way). I do this walk forward testing until I see a set up for entry. Then I would say to myself....buy at this point with an initial stop at this point....then I would go forward day by day hypothetically managing my trade. IMPORTANT.... you won't find a way that works all the time..you just need to find a system that works *reasonably* well *most* of the time.




I was wondering how you managed to study charts for 8 hours a day...your a firefighter! makes sense now.
whats the pay like?


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## beamstas (18 May 2009)

simoncar said:


> Try and predict what price may do the next day.




This is where most people go wrong


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## simoncar (18 May 2009)

8th-May-2009, 08:20 PM    #29  
beamstas 




Join Date: Sep 2008
Posts: 445   Re: Does anyone mind analysing a graph for me? 

--------------------------------------------------------------------------------

Was meant to say no better chance

I use T/a
Why?
Because it helps me feel like i can predict a price move
But i still can't!
__________________
Averaging down is simply compounding your losses  


Not correct *at all *Beamstas. You even have stated that t/a helps you feel like you can predict a price move. If you cant predict/anticipate where price will go next, how do you enter a trade? Every time you enter a trade you are predicting it will go a certain way. If it doesn't go the way you predict you will get stopped out at your initial stop loss point. Assuming you have one. If it goes the way you predicted your trade management rules come into play. If I see a stock that has gone up on good volume and retraces on low volume to a certain area I may enter a long position (depending on other factors also). I will only enter if I can place my initial stop at a point that *I believe * ( because we are only trading our beliefs in the market) is the point at which I no longer want to be holding the position. 'The market will either go the way I hope or it wont. I can only be a participant in the game. I will do so only on low risk for a high reward. But if I never predicted which way a stock would move I still wouldn't have entered my first trade.


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## simoncar (18 May 2009)

Hi Caesar, trading pays alot better than firefighting!!! Although with firefighting you earn your money straight away as opposed to trading where you may not earn too much or even go backwards in capital whilst going through the learning process.


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## doogie_goes_off (18 May 2009)

Watching/studying lots of charts is a very good start. Add research to this ie: some basic fundamentals like market cap and checking the cash position and previous quarters cash burn rate etc will leave you in a much better position to identify downside risk, the worst thing you can do is believe that the only way is up for a particular stock. It's a check and balance that the smart money already factors in for the top 300 or so stocks so it's hard to swim against the tide in these ones. Charting is one thing, preparing for entry is another. When you are sure the downside risk is low and the charting stars allign - enter but dont expect 100% sucess (hence the monopoly money advice). You need to beat the average, 50% of all losses are fate - accept this and move on don't for too long, each one is a learning experience. Next time you will have a better chance of identifying the risk with whatever research you can muster. Everyone is getting paid for the time they critically think about a stocks potential, whether the movement is up or down. The glass is half full and half empty, a chart does not tip it over the edge, confidence does, and confidence can be people/activity or even stupidity, although the market is rarely a stupid beast on the whole. A fundamentally good stock will emerge when their core businesses outperform the trend, sometimes this is delayed, call it 'blind sector lag' ie: people don't identify that company x is about to produce product y and the demand for product y is undersupplied. Research harder than anyone else and you may trade for profit but cross that tipping point without some fact then it's welcome to the blind loss where you learn you should have done some fundamental research. Good Luck.


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