The market PINEAPPLE Analogy for better tradingMany traders think that buying a stock is like buying a shirt in the store, IT IS NOT!
Buying a stock is like buying a PINEAPPLE, if you understand PINEAPPLES, you understand stocks.
1 - first you have the first sprouts of the pineapple, that came from a seed, this price is extremely cheap.
2 - then the plant grows, and you have a full plant with leaves. Price is increasing with value.
3 - then the plant produces an un-ripe fruit (Green pineapple). Price is increasing with value. The farmer sells to the distributor of pineapples the un-ripe pineapple at a higher price.
4 - then the fruit becomes ripe and is ready for eating. The grocery store sells the pineapple to a restaurant at a higher price.
5- you can get the ripe pineapple and cut it open, and serve it at a higher price to a standby customer. He will gladly pay.
6 - if you cut the pineapple open or just bought it, and you didn't realize it on time (sell it to someone else), the fruit is starting to spoil, so you will lower the price just to get rid of it.
7 - once a lot of time has passed, the fruit is spoiled and no one wants to buy spoiled fruit, so the price decrease and the pineapple/stock go to the garbage.
8 - until the cycle repeats itself...
Key takeaways:
- Expensive can be much more expensive -> don't be afraid to buy a new high.
- Stock is not like a shirt, if the price is down, it means something is wrong with it -->> the stock starting to spoil.
- Cheap can get a lot cheaper.
- When you buy a stock you need to look at it from the perspective of the seller/producer and not through the eyes of the customer...
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