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Tuesday, November 07, 2006 5:39:56 AM
As a trader/buyer of shares you NEVER know where the bottom is in advance but you can apply some probabilities based on T/A and News Events to help your odds. I (and likely a few others here) saw what looked like a floor developing at .004 cents several weeks ago. That does NOT mean the trumpets blow to announce a bottom. It can only be an educated guess with T/A etc. to increase your odds of being right.
Now, here is the most important part. That is why averaging down and buying while shares slide and slide is a deadly habit, although a common one with newer traders. I'm sure you have heard of the term "catch a falling knife". Averaging down is one of the VERY WORST things you can do but that is not commonly known to the general trading/buying public. Averaging down as a way to correct a losing position is, in fact, one of the biggest fables and wives tales in the stockmarket. What you are doing is accelerating your losses as shares slide further and further down......because you "thought" the bottom was near.
What you SHOULD do, and novice traders almost never do this.....(not calling you a novice) is add to positions when your stock breaks out ABOVE resistance (but you have to know where key resistance is). You should always add to positions as your stock rises and almost never when it is falling....but not many do it.
Anyway, I said more than I intended too.
Good luck.
Chartist1
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