A good trader will have the good sense to figure out the general trend, the feel of the market. In a good bullish market, you can buy a shit stock at a terrible price, hold on, and yet make some profit on it. But when the market turns bearish, you can buy a good stock at a cheap price and still end up losing money.
Lose money? So what if you hold on? If you have the capacity to hold on, you'll make it good in the end, won't you? Yeah, eventually... :) And it works so long as you have shares in companies with strong fundamentals (ie companies that always make increasing profits).
But when you buy stocks that are overrated - with cash you don't own- it usually leads to disaster.
Worse if the companies you own- have a dodgy heart- ie they have crap management and are unprofitable. But sometimes even good stocks can be overpriced- and it might take forever for the price to meet your costs- and then what are you going to do?
But in goodtimes, such things don't "really" matter, just wait for the market hype to heat up and you can offload them to the next sucker... Welcome to capitalism 101.
At the moment, the market here in Singapore is rip roaring great. But its gone up by massive amounts since last year. We've seen increases of 40% - 100% on just the main counters- the big stocks like DBS, Capitalland, UOB, not to mention Genting and ChinaEnergy.
Chances are that a big pause or correction is to take place. It will probably bounce back - I just hope to be totally out of my positions and being totally ready to pick up the solid stocks at discount prices.
This last 7 days I sold two of my stocks- I didn't hold them for very long- Ausgroup and Chartered. Ausgroup is a logisitics company for mining stocks in Australia. And Chartered produces computer chips (for Microsoft's Xbox). I sold Austock at 61 cents- afterwards a broking house issued a very positive report on them claiming that they were worth 80 cents. Austock rose as a result- and its now at 76 cents. I didn't get back in that ride, pity.
I think the market here is just eager for good news and will buy with frenzy anything that smells good. It should last for the moment. In the meantime, it gives opportunities for traders like me to make a quick buck.