Want To Win Big In The Market? Buy High, Sell Higher…
I know I’ve talked about this before plenty of times (in fact, I did just a couple of days ago here). But it’s always good to be reminded… the idea of momentum investing goes against all conventional wisdom.
In fact, based on the theories you have known or been told regarding successful investing, momentum investing shouldn’t work. But it does.
As long as you follow a set of rules, that is.
Heck, some of my own colleagues even allude to momentum as “witchcraft” or some “squiggly lines on a chart.”
But in its most basic form, momentum investing is simply buying stocks when they go up and selling when they start to go down. As easy as this sounds, it’s much harder in real life.
We Know This Works, Because We Do It All The Time…
You see, we are deeply engrained to “buy low, sell high.” It’s about the most comical mantra you’ll ever hear when it comes to buying stocks. Not because it doesn’t work (it does, obviously), but because it’s easier said than done.
Think about it. When you buy a stock, are you sure that you’re buying low? What if the stock falls further? On the flip side, how do you know when to sell high? When you’re up 10%, 20%, or 50%?
It’s tough. But it sure sounds good… and more importantly, it’s easy for us to wrap our heads around. Buy low. Sell high. Make money.
Now, if someone told you to buy something after it had a big run-up and was hitting new all-time highs, you’d probably laugh at them (if you weren’t familiar with momentum investing). It’s like waiting for egg prices to soar at the grocery store and then stocking up. Nobody wants to pay top dollar for anything. We all want to buy things when they’re “on sale.”
Fortunately, stocks aren’t eggs. They’re businesses that generate cash. And businesses go through growth periods. Times when business is firing on all cylinders. They’re having their best year(s) ever in terms of revenue and profit. They have, dare I say it, momentum behind them.
That’s when we want to buy. We want to buy when companies are early in this growth period. We want to buy high and sell higher…
It’s contrary to conventional wisdom. When a stock is in this growth phase and hits new highs, it creates uncertainty among investors. They tend to think that they missed the boat when a stock reaches a new high. Or that it’s time to sell.
Little do they know, that is exactly when they should be buying…
I’ve used Southwest Airlines (NYSE: LUV) as a perfect example of this in the past. Here’s what the chart looked like before we bought…
You show that chart to one person, and 9 times out of 10, they won’t buy. That ship has sailed, they think. And it’s hard to blame them. Nothing about that chart signals “buy low, sell high.” To most, it probably screams the stock has peaked and is about to drop.
But that’s not what happened…
We recommended the stock here in Maximum Profit and pulled a nice 40% gain from the trade.
For comparison, an investment in the S&P 500 over the same period would have generated only 10%.
In my previous article, I cited an extensive academic study. It conclusively demonstrated the power of momentum investing (when done right).
Of course, my followers know momentum investing is profitable. That’s because we have the receipts to back it up.
But here’s what I want you to take away from this…
When we make the decision to buy a stock hitting a new high, every fiber in our body is screaming at us not to do it. But that’s exactly what we should do. We should be buying winners. Because winners win. You’re not going to pick the football team with the worst record to win the Super Bowl.
So don’t pick stocks that are losing.
If you want to make money fast by investing in stocks, buy stocks on their way up. Buy high and sell higher.
In the meantime… remember the last crypto boom? My team and I think cryptocurrencies will surge again very soon…
That’s because three “blue chip” cryptocurrencies are getting major upgrades this year, and they could unleash a massive crypto boom. This could easily be a once-in-a-lifetime chance to take a small amount and turn it into a life-changing gain.
That’s why I just released a bombshell briefing about how you can profit. Get the details here…