Beating the Gun by Moving Fast

by Investing School on August 1, 2011

The term beating the gun is essentially self explanatory; it describes a practice of buying or selling an investment at a good price by moving faster than the market when news comes to light. Some investors seem to have a knack for this kind of ploy; they have their ear to the ground and manage to move before anyone else can, making the right decision and pulling uncanny profits.

The truth is that while everyone might succeed in beating the gun from time to time, strictly as a result of a bit of luck, the casual investor can’t count on this as a realistic strategy. This is a technique that is best suited to the very serious investor; one who can spend hours each day keeping up with the news, every market change and track how stocks are moving just about every minute. When the right moment appears such an investor is ready to buy or sell in seconds.

When you do beat the gun you usually manage it by passing the investment to someone else just as it is about to drop or purchasing stocks others are trying to liquidate just before they rise. Think of it as a global game of financial Old Maid. No one wants to be stuck with the losing stock at the end of the day, but knowing when to pass it off takes a bit of talent and finesse.

The average long term investor is unlikely to be in the situation where beating the gun is a critical component of his overall strategy.

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