Stock trading bottom fishing
March 25, 2020
Stock trading strategy bottom fishing
“In stock market terminology, bottom fishing can mean buying the cheapest investments (in terms of valuation ratios) available. Bottom fishing is value investing concentrated on the very cheapest companies. The term can be derogatory as it can imply a lack of attention to the quality of the investments selected.
In stock trading, bottom fishing can also describe the practice of driving the price of a security lower in order to trigger stop-loss orders, which will then commonly drive a security’s price even lower, at which point the person or entity responsible for the triggering will then buy up those shares. As part of this phenomenon, a security’s price will then often rise again quickly above the stop-loss order mark.”
What is bottom fishing in investing, trading stocks
“Bottom fishing refers to investing in assets that have experienced a decline due to intrinsic or extrinsic factors, and are considered undervalued. A bottom fisher, a moniker given to investors who practice the bottom fishing strategy, speculates, using either technical or fundamental analytical techniques, that an asset’s depressed price is temporary and will recover to become a profitable investment over time.
Bottom fishing refers to investing in assets that have experienced a decline, due to intrinsic or extrinsic factors, and are considered undervalued.
Bottom fishing can be a risky strategy when asset prices are justifiably depressed or a savvy strategy when asset prices are trading at irrationally low valuations.
The most popular bottom fishing strategy is known as value investing and its most famous practitioner is Warren Buffet”
Bottom fishing can be a risky strategy when choosing stocks to buy. Simply ignoring the fundamentals of stocks, the prospects of the companies, and the intrinsic value of stocks and buying stocks based only on the decline of their stock price is risky. An example of bottom fishing in stock trading that makes sense is buying a stock with good or excellent fundamentals, growth, at even an attractive dividend yield, after a one-time earnings miss. Why? If there is a consistency in profitability, growth, and the stock is traded below its true value or intrinsic value, a one-time earnings miss could be ignored soon after the selling pressure has stopped. Trend analysis is very important for financial ratios and stock trading, stock investing.