Johannesburg — BUY low, sell high. This myth is the granddaddy of them all. In the subject of investing, probably no more destructive misconception has ever been conceived than the idea of buying low and selling high.

Whatever the reason for its appeal and widespread popularity, no myth is more pervasive among amateur investors. The emotional appeal of this myth leads investors to commit many of the most common mistakes.

Stocks make all price movements in trends. Sometimes these movements are small, sometimes huge.

Given enough time, most stocks eventually have some large price trends which develop. Although most people know this, few take the time to realise the implications of it ... one of the most common investor mistakes is to buy stocks that are "down" in price.

The common assumption is that if a stock has gone from 40 to 10, it is somehow more likely to get to 40 again than is a stock that has gone from four to 10.

They are both at 10, but the majority of novice investors assume the stock that is "down" in price will be a better bet than one that is trending upward.

This is exactly the opposite of the truth!

Think about it: If a stock is destined to go from five to 100, it of necessity must pass through six, seven, eight, nine, 30, 50, 80 etc to get there. It does not have to (necessarily) pass through four, three, two or one on its way to 100. This is why picking stocks that are trending upward in price gives you a better chance of finding timely, winning stocks than buying stocks in a declining phase.

Why then, do most beginning investors tend to choose stocks that have declined in price, rather than choose ones that are at all-time highs? Simply put, because they "feel" safer buying a stock that once sold for a higher price.

It is impossible to reap big profits from the stock market unless you are willing to buy and hold onto stocks that are making new all-time highs in price. Further, stocks that are at new price highs tend to do better than those making new price lows.

Eventually, everyone finds stocks that will ultimately turn out to be big winners -- but not everyone ends up profiting from them. It is your trading strategy that will determine whether or not you reap the benefits of the winners you find. Extract from Five Minute Investing by Braden Glett

AMONG the most difficult things a trader can do is to change his or her mindset. If you are frozen in fear, then you will do nothing. That is your choice, and it may be what works for you. There are traders who justify everything by saying that they were glad they did nothing. So be it. But, if you are in the markets to do nothing, why are you in the markets at all?" Janice Dorn