Investing is about buying low and selling high. But how to predict what is the low and what is the high for a stock?
-Anil
You cannot predict what is the absolute low or what is their absolute high in value parlance. In value investing, we say that when stock keeps going down and we find value, it is like catching a falling knife. You don't know how long it will cut you after you buy. There are cases where we think it is low but it may go even low. So you cannot exactly predict but if you have a sense of valuation, PE ratio, PB ratio and you find that attractive, I think you should go ahead and buy it. And if it goes down further and if your conviction is still the same maybe you should add even more. It's very difficult to say that this is the low and this is the high similarly on the higher side. A value investor will typically sell early. He won't wait for the peak. So even after you sell, the stock may run up for quite some time. That's a typical challenge of a value investor.
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