The rumor mill – one of Wall Street’s most dangerous traps.
Rumors have a tendency to make some people a lot of money – but for the majority of traders REACTING to the rumor – it’s more likely to be at a loss than any kind of gain.
Let me know if this sounds familiar…
“Psst, did you see what’s going on with XYZ company? Yeah, shares are going bonkers! I’m going to get in on it fast to try and grab some fast cash… you might want to think about doing so too.”
Now, you may not have heard that EXACT conversation – but anybody who has bought or sold stocks for more than a couple of months has heard rumors about one company or another that is experiencing a surge due to any number of reasons.
Take Yahoo’s recent share surge…
Rumors started swirling about companies lining up to bid on buying the internet company for a cool $10 Billion. Rumors have been swirling about the fat cats lining up – whispers of Microsoft and even Apple have been heard muttered on the Street.
And while the attention was GREAT for Yahoo – it was the stockholders that that really made out – as shares experienced a quick 8% jump.
This is how you most investors get lured in…
“Over 8% gains in two days!! And the SKY’S the limit!!”
But I’m here to warn you… don’t fall into the trap!!
I know it’s enticing – as you’re watching shares climb steadily for a few days – tons of volume and all you can think about is how much money you’re leaving on the table by not pulling the trigger.
As you’re having an argument with yourself as to why you should buy and your cursor is hovering over the “buy” button – it’s at this moment that you need to remember your contrarian ideals.
Remember those? If everybody is buying… you’re selling. If everybody is selling… you’re buying.
Grabbing shares on a “rumor” more often than not will have you LOSING money in the long run. The moment the rumors begin to die down is when the stock usually experiences a sharp drop – sometimes lower than the previous high share price – sometimes SHOCKINGLY lower than the previous share price BEFORE the rumor.
Experience tells us… wait. If there’s a potential buyout or development that will change a stock’s landscape – better to act when the excitement dies down than to buy during the frenzy.
Have you ever seen a feeding frenzy? Sharks do it all the time…
You have a bunch of sharks vying for as much food as they can get their teeth on – but often come away with scraps… if they’re lucky!
I’d rather stroll in and grab a full meal than a few crumbs – and it all comes down to patience and discipline.
That’s why so many people trust GorillaTrades – they don’t have to worry about fighting elbows at a crowded table – they get to saunter in, grab their steak and saunter out. Almost ALWAYS leaving satisfied.
We’d love to help feed you by having you join GorillaTrades, as my risk-adverse trading system is designed to separate the solid moves from the rumors.
But even if you don’t… if you walk away from this article with one thing – it’s that it’s more prudent to exercise caution when considering buying a “hot” stock… as there is such a thing as too hot to touch.
“Be true to the game, because the game will be true to you. If you try to shortcut the game, then the game will shortcut you. If you put forth the effort, good things will be bestowed upon you. That’s truly about the game, and in some ways that’s about life too.” – Michael Jordan
