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I just wanted some thoughts on when it's too late to buy a stock. There are a lot of great companies out there and the ones I were attracted to didn't show a lot of big price fluctuations. So it seemed reasonable that they could continue to go up but at some point its likely they're going to level off or start going down. However, if I decided to invest in one of the companies I could lose money if they got to that point. So at what point does everyone notice a great stock and maybe it continues to rise a little but then begins falling or leveling off as many start selling? And how do you know if you're getting in on the action early way before too many start noticing its a great stock?
The life cycle of a stock is what you are getting at I think. New = Growth upwards movement in the price with some volitility. MSFT is an example of this explosive growth some volitility. The next phase of life is mature company again MSFT is an example of this. They pay a dividend now they are a virtual monopoly in software so their growth is limited/mitigated to some extent. The final phase is the decline of a company Kodak may be an example of that (don't count them out just yet) a mature company that has a hard time adapting to a new market condition. (who uses film anymore?) I saw recently Kodak is producing an almost disposable digital camera for cheap I wish them luck.
All that said the way to determine a "when to buy" is knowing what part of the cycle they are in can help. Analyze as much info as you can about said company then when there is no reason not to bite the bullet and buy it.
The strategy you use will help determine time to buy as well.
This is such a fantastic topic. I got into this mess in my first year of trading and I just unwound the trade. I lost about $370 in this stock on a $599 investment. The stock was JCPenney. It is 77% of my total loss. I kept buying on the way down and it just blew up on me. It was obviously a trade that I got into too late!!!!
I did okay with all my other trades; that's not to say I didn't lose money. I also lost some money on CME, but not nearly so much! But I've learned a good lesson. I surely am going to have stocks that have heavy losses in the future. After GME and JNPR, I am very scared of stop orders. These had stop orders at 12% loss and then it rebounded quickly afterwards. These were, I think, my second or third trades; my very first trade was CBH or Commerce Bancorp. I'm not exactly sure of the order as those were my first three trades.
I think, here charts can help.
If you think that a company should do well for some reasons, then the reasons materializes, then look at the chart: If you see a strong upsurge in its stock price, it means that the reason to buy is already priced in. It's too late.
If the chart is flat or down due to the general market environement, or because it stil didn't materialized in the revenues and profits of the company but the reason is still valid and confirmed by recent news, then it's still time to buy.
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