“Buy low, sell high” is a standardrized advice that you hear from time to time, and it is good general advice in a number of different circumstances.
Significance
If you wish to make a profit , whether it is running a business or investing in stocks or bonds, the purchase cost of your position should be lower than the price at which you eventually sell out of your position.
Buying Stock
You might buy stock you think will appreciate in value at Rs.10 and later sell it at Rs.15, making a profit of Rs.5. In doing this, you are buying at a low price and selling later after the price has moved higher. The difference is your profit. Buying a stock at Rs.15 and watching it decline to a low price, owing to bad news, means that if you sell at the low price of RS.5 on your trade.
Selling Short
You might sell stock you think will decline in value short by selling at the current market price and hoping to buy it back, to cover your short sale, at a lower price. So, you sell short at Rs.15, and you buy to cover your short sale after the stock value has declined to Rs.10. You still make a Rs.5 profit even though you sold first and bought later. The key is you bought low and sold high.
Business
If you want your business to be profitable you must make sure the costs of doing business, including salaries, production costs, and cost of inventory, is lower than the revenues you take in through your sales efforts.
Misconceptions
A simple statement like “buy low, sell high” gives the impression that it is easy to do, but any investment professional or business owner will tell you how difficult the simple act of buying low and selling high can be.