The answer is a matter of opinion, because they are so many things. Some may want to buy the stock at the bottom of its drop, thinking they have a chance to buy the stock at a higher price. Others may hold to buy as it begins a run, perhaps expecting a drop in price to follow. Still others may hold at the top and hope that they can buy enough to make a profit. The one thing they can’t do, with any certainty: get the stock over the 50% threshold they believe it needs.
The key, though, is the time frame in between. After all, even if a swing trader could predict any stock would go down soon and make a profit in the short term, there is only so much they can do in either direction while the price is still on the rise.
If you think of stock prices as an average, it may be helpful for an investor to look at the “mean” in our chart of stock prices versus time.
In other words, in the long run, the “mean” price will be lower than the “saggit” price, but the gap between them will widen.
But just as the mean is a bit misleading because it only goes up to a certain level, the “saggit” will also go up and down.
Now let’s take it a bit further. Suppose that the mean price falls above the “saggit” and then falls back below it again, with a long run return greater than the short run. At any given moment in time, the mean price will be higher than the “saggit” price, making an efficient trade profitable.
Now, how much should a trader hold on to at a particular time?
I can think of a number (in fact, I actually have a website on which I provide an hourly trading estimate for some of these questions) that has the following rough formula:
The formula is simply simple arithmetic, meaning it’s “good with fractions.” Basically, say you made a 30% bet on the stock at any time in the last month, say December 25, where you expect the price to go down to 31. In this case, if you bought at 31.12 after the last sell at 31.18, you would have to sell at 31.18 or even 31.16 to make a profitable trade.
As a practical matter, though, if you are trying to make money, it isn’t worth the gamble
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