206) Price Top & Bottom Cycle
What is the rationale for the investment price top and bottom?
Here's one simple explanation for you to ponder.
When investors are pessimistic about the investment, they start to sell. Not many wants to keep the investment anymore. Now Supply is higher than Demand.
When they sell, the investment price drops. More and more investors start to sell. There will be a time when all those who wanted to sell, had already sold. When all the sellers had sold, there are no more sellers. Those left behind are holders who are willing to keep the investments for a long term.
This is when the price is at the bottom. The price could no longer go lower. Good and experienced investors will note that the price is cheap and it is value for money. They will become buyers and start to buy. As there are no more sellers, the price will start to go higher to entice some holders to sell.
Now Demand is higher than Supply.
When the price starts to go higher, more early buyers start buy, the price will start to go even higher. More and more buyers start to buy, pushing the price even higher. The earlier buyers became sellers and start to sell and take profit. There will be a time when all the buyers had already bought and no more new buyers.
When the late buyers could not sell anymore, the price stops going higher. This is when the price is at the top. Some buyers will start to sell to get back their money. As there are no more buyers, the price starts to go lower. More and more investors start to sell and became sellers.
Now Supply is higher than Demand again and the cycle repeats.
However, note that for a good investment, the price will tend to trend upwards. The next top high will get higher. The next bottom low will also get higher. In other words,
Higher High, Higher Low.
It is very important that you invest into a good investment and keep invested for a long term
Be an Investor who invests for a long time.
A Trader do trading and holds the investment only for a short time.
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