What buy low, sell high means

The idea behind “buy low, sell high” relates the nature of stock market cycles. Stock prices fluctuate based on many factors: world events, the Treasury interest rate, a company’s growth earnings, the perceived risk of a stock, inflation, the economic strength of the market, and so on.

The price of a stock at any given time is based on the supply and demand at that moment in the market. As the equation changes so does the stock price.

The strategy behind buying low and selling high relies on trying to time the market. Buying low means trying to determine when stocks have hit bottom price and purchasing shares in the hope of them going up. Conversely, selling high relies on figuring out when the market has hit its peak. Once stocks have hit their maximum value, investors sell their shares and reap the rewards.

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