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History is littered with the corpses of "investors" in various assets who bought all the way down because "this is a great opportunity!" The exponential rise i

History is littered with the corpses of "investors" in various assets who bought all the way down because "this is a great opportunity!" The exponential rise is price is always accepted as "rational", but the equally exponential fall is always explained as temporary or manipulation, or something. A lot of people made money in 2009 when the stock market was incredibly cheap. But it was cheap because there was tangible value that could be calculated based on revenues, earnings, profit margins, etc. If you can't tell me what a Bitcoin should be worth, how do I know it's now cheap? That's speculation.

pyalot2 13y ago
There's been no "investor" in the history of investment that made money by buying high and selling low.
- collyw 13y ago
  From my limited understanding of finance, is that not what short selling is? (Followed by buying back at a reduced price).
  - joering2 13y ago
    You are bit confused. What he meant is that you cannot buy high and sell low and make money, which is obvious. Its bit ironically because people will always tell you buy low sell high, duh, but its easy to say that looking on historical charts, much harder to predict future. You never know if X is high or low for stock Y. Some people are glad they dump on $1,000 but that's silly. They are glad they were lucky because had this thing go to $10,000 they would have felt like winning 5 out of 6 numbers in month-worth accumulation of lotto. Its all pure speculation at this point. Short selling, in short, means you put a bet against commodity that this commodity will not rise up but lose value. Not all stocks/instruments can be "short sell", but you can for example bet against oil. So you say "I don't have any barrels but I can bet with someone this $100 worth of barrel will go down to $50. Can you bet against me?". Then someone comes and says "okay I believe it will be $150; I will buy this virtual security from you" (because you don't have oil at all so you sell virtually, on short sell. So actually you are negative 1 in quantity, someone is positive 1. If the value goes down to $50, you "won". So they need to cover the ride from $100 to $50 and you are $50 richer. They lost. So even if stock tanked, you gain/won. At such a point you actually buy the stock back from him to go from negative 1 to zero. If, however, the stock goes up to $150 you lost $50 because you were negative in quantity and you short sell. So there are people losing money when stock goes up. This mechanism was created many years ago to protect commodities like orange juice or cocoa pricing on stock exchange from large fluctuations.
  - bushido 13y ago
    Short selling is also buying low and selling high. You just do them in reverse order. Or quite literally you borrow the instrument, sell it to someone and then buy it lower (or higher if the position went against you) and give back the borrowed quantity.
    - collyw 13y ago
      That sounds like conventional "good" investing.

pyalot2 13y ago

There's been no "investor" in the history of investment that made money by buying high and selling low.

collyw 13y ago
From my limited understanding of finance, is that not what short selling is? (Followed by buying back at a reduced price).
- joering2 13y ago
  You are bit confused. What he meant is that you cannot buy high and sell low and make money, which is obvious. Its bit ironically because people will always tell you buy low sell high, duh, but its easy to say that looking on historical charts, much harder to predict future. You never know if X is high or low for stock Y. Some people are glad they dump on $1,000 but that's silly. They are glad they were lucky because had this thing go to $10,000 they would have felt like winning 5 out of 6 numbers in month-worth accumulation of lotto. Its all pure speculation at this point. Short selling, in short, means you put a bet against commodity that this commodity will not rise up but lose value. Not all stocks/instruments can be "short sell", but you can for example bet against oil. So you say "I don't have any barrels but I can bet with someone this $100 worth of barrel will go down to $50. Can you bet against me?". Then someone comes and says "okay I believe it will be $150; I will buy this virtual security from you" (because you don't have oil at all so you sell virtually, on short sell. So actually you are negative 1 in quantity, someone is positive 1. If the value goes down to $50, you "won". So they need to cover the ride from $100 to $50 and you are $50 richer. They lost. So even if stock tanked, you gain/won. At such a point you actually buy the stock back from him to go from negative 1 to zero. If, however, the stock goes up to $150 you lost $50 because you were negative in quantity and you short sell. So there are people losing money when stock goes up. This mechanism was created many years ago to protect commodities like orange juice or cocoa pricing on stock exchange from large fluctuations.
- bushido 13y ago
  Short selling is also buying low and selling high. You just do them in reverse order. Or quite literally you borrow the instrument, sell it to someone and then buy it lower (or higher if the position went against you) and give back the borrowed quantity.
  - collyw 13y ago
    That sounds like conventional "good" investing.