Record Low

A record low is the lowest price or amount ever reached by a security, commodity or index.

A record lows can be recorded by year, month, week, or a single trading day. They usually correspond to bad news about and less interest in a company or a trade. They may trigger high volume selling, which can drive prices even lower. Accordingly, many traders pay close attention to record lows in their markets. A record low usually is bad news for a publicly traded company. Stock prices for companies that drop to record lows typically struggle to recover or rebound in value. Record low examples are: unemployment is at record lows; the dollar fell to a new record low; yields have fallen to record lows; manufacturing jobs hit a record low; a pre-earnings warning sent shares tumbling to a record low. Most investors see record lows as signs of weakness and avoid buying, but some see them opportunities to buy low, sell high.

Buy low, sell high is an investing strategy where investors seek profit from the market's propensity to overshoot on the downside and upside. Although simple, it is difficult to implement and execute systematically. It is easy to identify highs and lows in hindsight, but in the present moment, it is not. And, prices affect the psychology and emotions of market participants. Experienced traders use various forms of technical analysis to identify optimum buy and sell levels.

Markets may be driven to high prices during market bubbles or low prices during market sell-offs. These events may be opportunities to buy low and sell high. However, if the market continues trending in one direction, the strategy would not work. And prices that look high one day may be perceived as low the next. Traders and investors aim to develop objective methods to determine whether prices are high or low. When prices are low, sentiment tends to be negative overall, influencing more bullish holders to sell. Similarly, when prices are high, it may be difficult to justify selling a winner.

Market participants’ perspectives vary: there will be some bulls who consider a stock price to be low while bears see the same price as high, with each side able to logically justify their views. The challenge is to determine which stocks are reaching extremes based on fundamentals and which are driven by market psychology. A simple buy low, sell high strategy employs moving averages, which are derived from price alone, so are helpful in determining price trends.