Why I Buy Highs Instead Of Lows

Eyeglasses on Open Book

Image Source: Pexels
 

Everyone tells you to "buy the dip." I do the opposite - I buy stocks hitting new all-time highs.

Sounds crazy? My recent track record says otherwise:

  • TSLA: +155% in 4 days
  • QBTS: +82% in 24 days
  • ALAB: +82% in 69 days
  • B: +40% in 70 days

All bought at or near highs. All massive winners.


The Data That Changed Everything
 

Here's what nobody talks about: If you invested in the S&P 500 at new all-time highs between 1988 and last year, your returns over time crushed buying at any other point.

After six months? You're ahead by over a full percent.
After one year? The gap widens.
After three to five years? It's not even close.

This isn't luck. It's math.


Why "Buy the Dip" Kills Your Returns
 

Most traders are conditioned to think highs mean danger. They wait for pullbacks that never come, or when they do come, the stock never recovers to new highs.

I learned this lesson the hard way just yesterday. Got stopped out of Serve Robotics (SERV), then watched it rip 26% the next day. 

Was I right about the direction? Yes. Did I make money? No.

That's the difference between wanting to be right and wanting to make money.


The Real Edge: Asymmetric Risk
 

Here's what Jeff Bezos understands that most traders don't: "Give it a 10% chance of a hundred times payoff. 

You should take that bet every time, but you're still going to be wrong nine times out of 10."

In business, when you step up to the plate, you can score 1000 runs. That's exactly how I approach buying highs.

I size relatively small, never put on a position more than 10% of my 

My targets? 

Three to four times what I'm risking. 

About 65%, with winners averaging 2.3 to 2.5 times the size of losers.


The Psychology Behind High Momentum
 

When stocks hit new highs, institutional money follows. 

They're not buying because they love expensive stocks - they're buying because momentum creates momentum.

Look at NVIDIA (NVDA) breaking out to new highs. Do you think that's bullish or bearish for the overall market? It's bullish, and it's not just NVIDIA.

We're moving from the great tech reset to the great tech acceleration. The semiconductor index went from 25% below its 200-day moving average to 25% above in less than six months. 

That's not a coincidence.


The Patience Factor
 

Here's what separates profitable traders from everyone else: patience. Patience to act, patience to stop yourself out, patience to book profits, patience to enter positions - all within a planned agenda.

I call patience the holy grail of trading. Most people can't handle waiting for the setup, so they settle for mediocre entries and mediocre results.


How to Buy Highs Without Getting Burned
 

  1. Position size properly, never exceed 10% of your portfolio in one position.
  2. Set clear stops: I typically use 8-10% stop losses on stocks
  3. Target 3-4x your risk: Small losses, big wins
  4. Wait for confirmation: New highs with volume and momentum

When everyone's afraid to buy at highs, that's exactly when you should be most interested.


The Reality of Trading Waves
 

Your account won't go straight up. Mine doesn't either. You'll have drawdowns - the key is forming higher highs and higher lows in your portfolio over time.

Similar to market trends, your trading account should exhibit the same behavior: higher highs and higher lows. If it's not, you need to change the trend.


The Action
 

Stop waiting for the "perfect" dip that may never come. Start looking at stocks breaking to new highs with real momentum behind them.

The data doesn't lie: buying strength outperforms buying weakness over time. While everyone else is trying to catch falling knives, I'm riding rockets.

That's how you turn 1% risks into 155% gains in four days.


More By This Author:

The Travel Sector Is About To Collapse
Frothy Markets Feel No Fear
The Dollar Signal Everyone's Missing Right Now

Neither TheoTrade nor any of its officers, directors, employees, other personnel, representatives, agents or independent contractors is, in such capacities, a licensed financial adviser, registered ...

more
How did you like this article? Let us know so we can better customize your reading experience.

Comments

Leave a comment to automatically be entered into our contest to win a free Echo Show.
Or Sign in with