Fusion Investor Chatbox

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Disclaimer: As usual, you are solely responsible for your trading & investing decisions.

Wednesday, January 7, 2009

Which is cheaper - Parkson at $6 or Parkson at $4?

On the surface, the answer is obvious isn't it?

Who wants to buy something for $6, when you can buy it at $4?

But if you think $4 is cheaper than $6, what if I tell you that you are not necessarily right?

What if I tell you that the answer depends on what type of trader you are?

Take a look at this chart.

Imagine you are a mid-term swing trader who buys at the pivot point, and hold stocks anywhere from a few days to a few weeks.

You bought PARKSON at $6 at the pivot day 28 March 2008.

This is a wonderful timing, because it broke the downtrend line on that day, and easily exceeded $6. Any swing trader worth his salt whould have gotten approximately 5% to 10% return in a few days/weeks.

Yet, imagine if you bought PARKSON today at $4.

Of course, $4 is cheaper than $6 ...

Yet, the swing trader would probably not want to touch PARKSON at $4 today, but he is happy to buy PARKSON at $6 on 28 March 2008.

The question you have to ask yourself is which type of trader are you?

Are you happy owning PARKSON on 28 March 2008 at $6?

Or are you happy owning PARKSON today at $4?

Investing & trading are not absolute concepts.

Think about it.

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