I don’t use a Buy Below Price but a Buying Range.
I do it differently. When I see in my technical indicators the possibility of a downtrend, I consider waiting some more so I could possibly buy at a lower price.
I monitored JFC last January 21, 2015 to give you a concrete example of the importance of having a Buying Range.
As of 02:07:57 PM GMT+8
Buying Range: 209.60 and below.
Let’s wait at 209.60. The 15-day EMA’s strong support is at 209.60.
Let’s assume that your Buy Below Price for JFC is 220.00. Technically, you can buy at the lowest ASK price you’ll see on the BID-ASK spread.
However, I saw in my technical indicators that JFC drew a downtrend pattern.
I wrote that comment above at 2:07:57PM GMT+8. As seconds went by, you’ll see in the chart below that JFC started to hit 209.80, 209.40, and 209.20.
Imagine what would have happened had I only followed a Buy Below Price.
If you are only using a Buy Below Price, you might have bought at 210 because that was still within your Buy Below Price, yes?
But because the technical indicators and the charts gave a clue that JFC would draw a downward trendline after recess, I was able to buy the stock at a cheaper price.
This is one of the benefits of having a Buying Range when trading.
My Buying Range estimates do not always happen. But analyzing where the stock is going and setting a “moving entrance” is better than brainwashing yourself with “It’s still within the Buy Below Price, anyway”.
Many brokers have a Buy Below Price in their investment guides, but it doesn’t tell you which price point in the on-going trading period is the best entry point.
Don’t you realize, that if the stock’s Buy Below Price is P100.00, you’re technically groping in the dark at which price you should buy between P0.01 to P99.99?
Granted that the price may not realistically touch own to P0.01, but do you see the fact that you will still have to do your homework just so you can buy at a cheaper price?
Did you learn something new today? Let me know in the comments.
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