Once you’ve identified the overall trend and the leading sector, you want to buy the leading company. Why?
Most people want to have the best or want to be associated with the best. Everyone writes about the winner of the World Cup or gold at the Olympics. Few people are interested in second place or silver. In many cases, the winners get most of the attention, money, and status.
Quick example: Who’s the fastest man on earth? Usain Bolt. Who’s second fastest? I wouldn’t know.
And the fact is, Usain is not much faster than second place. But nobody really cares about second place either. It’s all about the best, the fastest, the winner.
For companies, that means your products are compared to the rest. Employees want to work for the best company, not the second best. The list goes on and on.
Sometimes the benefits are more subtle. But even if you have just a small advantage, if you compound that over time, a small advantage can become huge.
We all know compounding is the eighth wonder of the world. And compounding is not only bound to investing. It works in all aspects of life and business.
That’s why winners keep winning.
In every industry, there is a market leader: Apple for smartphones, Google for search, Amazon for online shopping, Nvidia for GPUs, and so on.
Typically, the leader has a huge lead compared to the rest of the industry.
Sometimes, there are two market leaders that are closer together. Think Coca-Cola and Pepsi, Visa and Mastercard, McDonald’s and Burger King, FedEx and UPS.
What are the characteristics of a market leader?
Growing market share
Rapid revenue and earnings growth
Strong brand reputation
Pace of innovation
When do you buy the leader?
Obviously, you want to be in a market uptrend. You want to buy them breaking out of a base.
The reason is simple. Investing is inherently risky. There are a lot of uncertainties. Many things can and will go wrong. So, your goal is to minimize risk. There are a few ways to do that: doing your research helps, being in a market uptrend helps, focusing on companies with good fundamentals helps, and buying at the right time helps.
Buying at the right time not only lowers your risk on the way in but also gives you a clear reference point for when things start to go wrong. If a stock breaks down well below your entry or key support levels, that’s a signal to reassess or cut your losses. In other words, a good entry helps define your exit plan, which is crucial for managing risk effectively.
Buying a stock coming out of a base is less risky because you’ve got the trend in your favor. A base is pretty much a sideways range. So, as with the market trend, you want the stock to trend up. Benefits are similar: upward momentum, less overhead supply, etc.
Now, there are a number of different types of bases.
Some of the most common ones are Cup & Handle, Flat Bases, Double Bottoms, and Inverse Head & Shoulders.
These are typical at the early stages of a move or a trend.
Bases that happen after a move has already started are called continuation patterns/bases: Flags and triangles are typical.
On top of that, you can limit the amount of risk you take. Because there are 3 things that can happen when a stock breaks out.
It trends higher
It retests the break-out range
It fakes out the first buyers
Breakouts don’t always work, and the failure rate can be high.
Typically it's because your selection was off or the market environment is hostile.
That is why you want to limit the downside. There needs to be a clear cutoff point. No questions asked. Often the biggest losses typically happen when we let a small loss get out of hand because we want to get out at break-even. And you can always buy them back, IF they turn around.
That’s why it’s so important to stack the odds in your favor.
One extra confirmation is volume.
Breakouts with high volume are stronger and less prone to failure since interest buy or sell interest is high and the price is more likely to continue into the breakout direction. High volume also means that institutions are accumulating. It's hard for the big players to hide their steps.
Bonus Tip: You can check the leading stocks here.
Once you’ve identified the overall trend and the leading sector, you want to buy the leading company. Why?
Most people want to have the best or want to be associated with the best. Everyone writes about the winner of the World Cup or gold at the Olympics. Few people are interested in second place or silver. In many cases, the winners get most of the attention, money, and status.
Quick example: Who’s the fastest man on earth? Usain Bolt. Who’s second fastest? I wouldn’t know.
And the fact is, Usain is not much faster than second place. But nobody really cares about second place either. It’s all about the best, the fastest, the winner.
For companies, that means your products are compared to the rest. Employees want to work for the best company, not the second best. The list goes on and on.
Sometimes the benefits are more subtle. But even if you have just a small advantage, if you compound that over time, a small advantage can become huge.
We all know compounding is the eighth wonder of the world. And compounding is not only bound to investing. It works in all aspects of life and business.
That’s why winners keep winning.
In every industry, there is a market leader: Apple for smartphones, Google for search, Amazon for online shopping, Nvidia for GPUs, and so on.
Typically, the leader has a huge lead compared to the rest of the industry.
Sometimes, there are two market leaders that are closer together. Think Coca-Cola and Pepsi, Visa and Mastercard, McDonald’s and Burger King, FedEx and UPS.
What are the characteristics of a market leader?
Growing market share
Rapid revenue and earnings growth
Strong brand reputation
Pace of innovation
When do you buy the leader?
Obviously, you want to be in a market uptrend. You want to buy them breaking out of a base.
The reason is simple. Investing is inherently risky. There are a lot of uncertainties. Many things can and will go wrong. So, your goal is to minimize risk. There are a few ways to do that: doing your research helps, being in a market uptrend helps, focusing on companies with good fundamentals helps, and buying at the right time helps.
Buying at the right time not only lowers your risk on the way in but also gives you a clear reference point for when things start to go wrong. If a stock breaks down well below your entry or key support levels, that’s a signal to reassess or cut your losses. In other words, a good entry helps define your exit plan, which is crucial for managing risk effectively.
Buying a stock coming out of a base is less risky because you’ve got the trend in your favor. A base is pretty much a sideways range. So, as with the market trend, you want the stock to trend up. Benefits are similar: upward momentum, less overhead supply, etc.
Now, there are a number of different types of bases.
Some of the most common ones are Cup & Handle, Flat Bases, Double Bottoms, and Inverse Head & Shoulders.
These are typical at the early stages of a move or a trend.
Bases that happen after a move has already started are called continuation patterns/bases: Flags and triangles are typical.
On top of that, you can limit the amount of risk you take. Because there are 3 things that can happen when a stock breaks out.
It trends higher
It retests the break-out range
It fakes out the first buyers
Breakouts don’t always work, and the failure rate can be high.
Typically it's because your selection was off or the market environment is hostile.
That is why you want to limit the downside. There needs to be a clear cutoff point. No questions asked. Often the biggest losses typically happen when we let a small loss get out of hand because we want to get out at break-even. And you can always buy them back, IF they turn around.
That’s why it’s so important to stack the odds in your favor.
One extra confirmation is volume.
Breakouts with high volume are stronger and less prone to failure since interest buy or sell interest is high and the price is more likely to continue into the breakout direction. High volume also means that institutions are accumulating. It's hard for the big players to hide their steps.
Bonus Tip: You can check the leading stocks here.
Once you’ve identified the overall trend and the leading sector, you want to buy the leading company. Why?
Most people want to have the best or want to be associated with the best. Everyone writes about the winner of the World Cup or gold at the Olympics. Few people are interested in second place or silver. In many cases, the winners get most of the attention, money, and status.
Quick example: Who’s the fastest man on earth? Usain Bolt. Who’s second fastest? I wouldn’t know.
And the fact is, Usain is not much faster than second place. But nobody really cares about second place either. It’s all about the best, the fastest, the winner.
For companies, that means your products are compared to the rest. Employees want to work for the best company, not the second best. The list goes on and on.
Sometimes the benefits are more subtle. But even if you have just a small advantage, if you compound that over time, a small advantage can become huge.
We all know compounding is the eighth wonder of the world. And compounding is not only bound to investing. It works in all aspects of life and business.
That’s why winners keep winning.
In every industry, there is a market leader: Apple for smartphones, Google for search, Amazon for online shopping, Nvidia for GPUs, and so on.
Typically, the leader has a huge lead compared to the rest of the industry.
Sometimes, there are two market leaders that are closer together. Think Coca-Cola and Pepsi, Visa and Mastercard, McDonald’s and Burger King, FedEx and UPS.
What are the characteristics of a market leader?
Growing market share
Rapid revenue and earnings growth
Strong brand reputation
Pace of innovation
When do you buy the leader?
Obviously, you want to be in a market uptrend. You want to buy them breaking out of a base.
The reason is simple. Investing is inherently risky. There are a lot of uncertainties. Many things can and will go wrong. So, your goal is to minimize risk. There are a few ways to do that: doing your research helps, being in a market uptrend helps, focusing on companies with good fundamentals helps, and buying at the right time helps.
Buying at the right time not only lowers your risk on the way in but also gives you a clear reference point for when things start to go wrong. If a stock breaks down well below your entry or key support levels, that’s a signal to reassess or cut your losses. In other words, a good entry helps define your exit plan, which is crucial for managing risk effectively.
Buying a stock coming out of a base is less risky because you’ve got the trend in your favor. A base is pretty much a sideways range. So, as with the market trend, you want the stock to trend up. Benefits are similar: upward momentum, less overhead supply, etc.
Now, there are a number of different types of bases.
Some of the most common ones are Cup & Handle, Flat Bases, Double Bottoms, and Inverse Head & Shoulders.
These are typical at the early stages of a move or a trend.
Bases that happen after a move has already started are called continuation patterns/bases: Flags and triangles are typical.
On top of that, you can limit the amount of risk you take. Because there are 3 things that can happen when a stock breaks out.
It trends higher
It retests the break-out range
It fakes out the first buyers
Breakouts don’t always work, and the failure rate can be high.
Typically it's because your selection was off or the market environment is hostile.
That is why you want to limit the downside. There needs to be a clear cutoff point. No questions asked. Often the biggest losses typically happen when we let a small loss get out of hand because we want to get out at break-even. And you can always buy them back, IF they turn around.
That’s why it’s so important to stack the odds in your favor.
One extra confirmation is volume.
Breakouts with high volume are stronger and less prone to failure since interest buy or sell interest is high and the price is more likely to continue into the breakout direction. High volume also means that institutions are accumulating. It's hard for the big players to hide their steps.
Bonus Tip: You can check the leading stocks here.
