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Warren Buffet says buy when everyone is selling and sell when everyone is buying. Taking into consideration the support and resistance levels, everyone is selling near the resistance level and everyone is buying near the support levels. If we follow Buffet's advice, aren't we going to incur loss in every trade?

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    Obligatory Will Rogers quote: "Don't gamble; take all your savings and buy some good stock and hold it till it goes up, then sell it. If it don't go up, don't buy it." – Pete Becker Jan 16 '18 at 23:03
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    It's easy to buy and harder to sell due to the Loss aversion bias and Sunk cost bias. – lloyd Jan 17 '18 at 7:02
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    For every single stock being sold there is exactly one stock being bought. There is no such scenario as "everyone is buying". – Thomas Jan 17 '18 at 8:33
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    @Thomas while that is in fact true that such a scenario "does not exists" - it kind of does anyway. When prices are driven down, indicating a lot of people are willing to sell (everyone is selling, figuratively - or at least trying to). When prices are driving up, it is indicating a lot of people are willing to buy (everyone is buying, figuratively). Sure - for every sale someone needs to buy it, making your statement true, litterally. – ssn Jan 17 '18 at 9:01
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    @6nagi9 - You wont sell ice cubes while the price is too high. As you lower the price you sell more but make less profit. On a hot summer day, you can charge a lot more then you can mid winter, but to paraphrase Thomas, for every buyer, there is a seller if the price is right. – Paul Smith Jan 18 '18 at 13:18
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It's worth noting that Warren Buffet is a value investor, not a trader. As such, it doesn't tell you much about technical analysis or trend following.

Instead, he's implying that when the market gets overly excited (overvalued) or panics (undervalued), there are opportunities for long-term profits, assuming you do your due diligence and have an opinion of what the fair value should be.

Note that it's difficult, if not impossible, to consistently time and beat the market and that the costs incurred by frequent trading eat away at your profits.

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    Exactly. His preferred time to buy would be when everyone is running around screaming "we're all going to die" and good companies are on sale. – zeta-band Jan 16 '18 at 20:19
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    @zeta-band The hard bit is to find the "good companies". If everyone panics and all stocks are low, you still need to find one that will go up again. – Josef Jan 17 '18 at 11:56
  • Note that Mr Buffet does have a history of consistently beating the market - but I don't think he particularly tries to time them. – Martin Bonner Jan 17 '18 at 12:50
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    @6nagi9 Buffet's investment horizon is measured in years and even decades, as opposed to days/weeks/months. If the market, e.g. the S&P 500 sells off because investors get cold feet, there is an opportunity to buy stocks of solid companies with a sound business model and good fundamentals at fire-sale prices and see their value go up in the following years. – 0xFEE1DEAD Jan 17 '18 at 16:16
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    The nice thing about a major sell-off is it tends to bring down all prices. So if a sell-off starts in the banking sector, say, and drags down the prices for a bunch of otherwise sound tech companies, you just got sale prices on those tech stocks. As this answer implies, you buy them at a discount, they may continue to go down with the market, but if the whole market is undervalued there is an excellent chance that those sound companies will come back once the sell off is over and you'll have great stock at a low price. – Todd Wilcox Jan 17 '18 at 22:22
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I believe you are confused by the vague language.

Trading is a process where smart money and institutions take money from the public. Consider the concept of "market cycle". Institutions start a trend, buying in at the bottom, and only then it gets the public's attention and they start buying in higher, chasing the price. When the public is at peak euphoria, feeling so smart, institutions start "distributing" their position to this panic-buying and soon to be bagholding public. This is the market cycle phase known as distribution. After institutions dump their position on the public the market starts contracting as the public sells lower and lower than they bought in. When the public is at peak panic, the "accumulation" phase happens where institutions buy positions from the public at the bottom.

Warren Buffet says to buy when "everyone" is selling, and sell when "everyone" is buying. When he says "everyone" he is talking about the public, Joe Sixpack. To rephrase, what he means is "Be like institutions, accumulate during peak public panic and distribute during peak public euphoria".

Being a long term value investor, he is speaking in terms of timing trades with the broad market cycles. This is not daytrading advice. Don't get confused and think this should be applied to every technical signal, blindly doing the opposite of what they say. It does not mean to buy when moving averages cross down, or to sell when macd cross up. It certainly does not mean to sell above support and buy below resistance.

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    The idea of "market cycles", like technical analysis, suggests a predictable price development. ("free money"). Basic economic insight will tell you there's no such thing as free money. Stocks that go up might go up further; stocks that go down can go down further. – MSalters Jan 17 '18 at 9:09
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    @MSalters Which basic economy insight says there is no market cycles? – xiaomy Jan 17 '18 at 12:22
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Not at all. The time period where everyone is selling a stock and when everyone is buying a stock may be years apart. The exact dynamics of what's happening precisely when you buy and precisely when you sell won't significantly affect the profit or loss you take on a trade. What will, however, is whether you bought or traded the right stock, and that's what Buffet's advice is intended to help you do.

If everyone is buying a stock, that likely means its price is higher than its value. That's makes it a good stock to sell. If everyone is selling a stock, that pushes its price below its value. That makes it a good stock to buy.

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Like others have said, Warren is a value investor. He is not really interested in technical analysis or trend spotting. He buys a company that he has determined is undervalued, and waits for it to be overvalued.

He has a quick way of checking the fundamentals and presumably puts the company through a model that in a few minutes, will tell him whether the firm is undervalued.

Here is what I wrote for another question similar in nature:

Value investing involves looking at a firm's fundamentals and coming up with an "intrinsic value" per share. From there, you determine if the stock is under or over valued relative to market share price.

A disciplined value investor will sell when their models say that the stock is no longer undervalued. Any interest in that company after that is not value investing and is simply betting on the stock. Of course an investor will update models and change them appropriately throughout the investment period to make sure their models reflect current conditions.

There is no average or expected time it takes for an undervalued stock to appreciate. The idea with value investing is that the market will correct "mistakes" made in undervaluing a company. It could also be that the firm's fundamentals point towards a strong outlook (typically 10 years) and the market has yet to realize this.

Hope this helps you make sense of things!

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The theory couldn't be more straightforward. You sell when you find better things to do with your money. Either sitting on your current account or other investments. It follows that that's the same reason to buy, ie because your money will be more productive allocated in an investment.

In the meantime -most of the time- the investment is left alone either compounding or generating cash via dividends which you have to allocate in turn or, in some cases (pure value investing), eventually realizing its fair value.

Allocating capital is simply done after an estimation of future returns of all the universe of possible investments at any given time for a somewhat arbitrary long period into the future.

Support and resistance levels is just witchcraft lingo.

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Investors and traders have different perspectives on markets. If a security's price falls further from an initial buy, a trader may have a stop loss or just sell because the trend is downward, while a long-term investor would view that price fall as a buying opportunity.

A value investor's time frame is typically much longer than a trader's time frame (years vs. months), so you can't really compare what Buffett says to a short time frame. When Buffett says to buy low, sell high, buy in panic, sell in optimism, his price to buy is with respect to his evaluation of intrinsic value, not to technical patterns. Usually, short-term price movements are of no concern to value investors, unless a price move reflects new information that has a big impact on the investors' appraisal of value.

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Very few follow Buffet's advice. That's why it works.

And, of course, you've got to know when "everyone" else has stopped driving the price up (or down, as the case may be) so that you can jump in and do your thing.

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