How To Understand How Investors Use Historical Data

Most investors rely on their stockbroker for investing advice.  If they are channeled into a fund, they no longer have any say in what individual stocks to buy since the fund managers are doing the buying for the group managed group stock.  They can opt to sell their fund if they are not pleased with the results.  However, they might lose more money by selling out early and probably choose to stay until they can sell without being penalized for selling early.  When investors choose to play an active role in choosing stocks, their stockbroker becomes a close contact with all of the information he and the brokerage company that he works for has available.

Stockbrokers have information on individual stocks by looking through various sources.  Most stockbrokers use a handy book that gives the Dow Jones averages for any listed stock by showing original selling price, fluctuations and current selling price.  When a stock has been sold on either the New York Stock Exchange, the American Stock Exchange or as an Over the Counter Stock, it has developed a history of performance.  The stockbrokers who study a particular stock learn what product or service the sellers of that stock are producing.  They also learn how to identify how solvent those sellers are in regards to their company.  They compare the ups and downs of that stock for a year to see just how accurately the lowest point of the stock matches a downswing in the company's sales with how accurately the highest point of the stock matches how accurately an upswing in the company, for example, new orders.

All of this information takes time to accumulate, and the stockbroker usually charges his client for his time in doing research.  Investors use this historical data to buy or to sell a stock.  Most investors don't want to buy into a stock when it is selling at its highest point for obvious reasons.  Those investors who buy in high are not going to make any money when they go to sell their shares.  Even those investors who are long term investors who buy a stock and forget about it, often bequeathing their stocks to their heirs, would rather buy a stock at its lowest point to be able to buy more shares with the money that they have allocated for that stock's acquisition.

It is simple to understand how investors use historical data if you keep one thing in mind: You want to buy when the stock's history shows it is at its lowest point, and you want to sell when the stocks history shows it is at its highest point.