“Don’t get carried away… it will come down.”
Down the line, when new traders find their comfort with the market basics, they are supposedly given a rule that follows a law that of Physics—what goes up must come down.
Stock that goes up must come down, says and believes many.
While a decade back the theory had less contention, not today. With the surge of analytical tools and technologies, more and more figures have surfaced to prove that this is simply a myth based out of someone’s “practicality” and “safe playing”.
Are you one of those who believe this?
Fact: What Goes Up Might Keep Going Up
In reality, there isn’t any definite pull for the price of stocks. The fluctuations depend on an awful lot of factors, most importantly the economic condition of that particular country. Admittedly, even for optimists, market to remain upbeat and favorable seems like an unlikely situation.
However, ruling out the possibility of having price consistently go up on the basis of rationality sounds just as irrational. There are countless such examples of stocks whose price have only skyrocketed over a period of time with only few negligible slums; most notable is that of Berkshire Hathaway’s.
Don’t let this myth blindly sway your decisions
This myth largely affects the entire technical analysis process for some people. While for others, it pushes them into rushing and taking partial profits. Don’t be one of these stock traders. Don’t blindly follow a theory that falls short in its practicality, thanks to what data-driven studies have found.
When strategizing your trades, don’t assume from the get-go that prices are going down for the stocks. Unless backed by your own analysis, keep faith that prices will continue surging higher. This would likely turn out true, if you have down your homework in selecting the right industry and company well.
This article is third in a series of three that talks about the stock market, the myths persisting and how regular traders might be affected by them.