Different people have their own set of stock selection logic. Many retail investors like to buy low-priced stocks, thinking that low-priced stocks have limited room to fall and are more likely to rise. On the contrary, others are often keen to choose stocks that hit record highs to buy. Buying record stocks seems to be a mistake that retail investors think is "chasing high". So is this method reasonable? Let's analyze this problem with you.

First of all, we need to find out what it means for stocks to hit a record high. According to the classical technical analysis theory, the stock price will change along the trend for a period of time. Once the upward or downward trend is formed, the stock price will continue to rise or fall. But in fact, most stocks are not like this, and their trends tend to be more cyclical, rising, falling and fluctuating for a period of time. But there are still some stocks that will be strong all the time or from a certain time, and the stock price will continue to rise. When the stock price exceeds the highest point at any time before, it is called an all-time high.

Second, why did the stock price hit a record high? We know that capital is the direct factor to push the stock price up. When a stock is sought after by capital and keeps buying, then the stock price will definitely rise. In this process, because different people have different views on this stock. Some people sold before the stock price hit a new high, but at the same time, new funds continued to join, and eventually the stock will continue to rise. And because the selling pressure is getting smaller and smaller, the stock price may rise more easily and even hit a record high.

So what kind of stock can hit a record high? It can be roughly divided into the following three situations:

One is the stock that has been very stable since its listing, with little big decline, and the stock price keeps rising, constantly surpassing the previous high point. Most of these stocks have excellent fundamentals, have their own unique technological advantages and occupy a leading position in their respective industries. It is easy to attract institutional funds to open positions on a large scale for a long time, and retail investors dare to buy enthusiastically, so this record-high stock is worth buying and holding for a long time.

The other is a stock that has experienced a big decline, and after showing strength at a certain moment, it may also hit a record high. The internal reason may be that there are some favorable factors, such as the success of the company's new product development, technical upgrading, policy support, or capital injection by powerful institutions. The company's fundamentals may be greatly improved, so the stock price is also easy to hit a record high. And the announcement of this kind of good news often lags behind the rise of stock price, which is a rare situation.

There is also the so-called "strong bone". The circulation of this stock is very small, and most of the shares are in the hands of the so-called bookmakers. Even if the trading volume is small, the dealer can easily raise the stock price and even hit a record high. If you come across this kind of stock, you'd better not participate. Even if this kind of stock can make money in a short time, it is tantamount to picking chestnuts from the fire. Once it collapses, it will suffer heavy losses.

Generally speaking, it is reasonable to buy stocks that hit record highs. But at the same time, I want to remind you that you must find out what kind of stock you want to buy before buying, so as to correctly cope with the changes in the market.