How to Buy Stock Low & Sell High

You can use event-driven trading strategies even if your crystal ball is in the shop.
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Unless you are psychic, it's usually impossible to systematically buy low and sell high. However, there are a few unusual circumstances which favor buying a stock at a lower price and selling it at a higher price. Announcements of stock splits, divestitures, and cash-for-stock takeovers provide forewarning about the possibility of future price increases for a stock. These are event-driven trading strategies whose time frames afford the opportunity to buy at a lower price before the event and to sell at a higher price after the event.

Step 1

Scan the financial media for announcements. Sites like Yahoo Finance, Bloomberg and Reuters report companies' announcements about stock splits, divestitures, and cash-for-stock takeovers. Search the SEC filings a particular company through the U.S. Securities and Exchange Commission's online EDGAR database to confirm facts and find additional information.

Step 2

Purchase the stock prior to the announced split, divestiture, or cash-for-stock takeover. In the case of the latter, make sure the purchase price is substantially lower than the takeover price.

Step 3

Liquidate the stock after the event. In the case of a stock split, wait until shares have appreciated above and beyond the prices they would have as fractions of the original share price. For divestitures, wait until the business unit or assets have been sold and the price of the stock has appreciated before selling your shares. In the case of a cash-for-stock takeover, your shares will be liquidated for you and you will receive a cash payment.

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