Best Time to Buy and Sell Stock: A Guide for Beginners

Have you ever wondered when is the best time to buy and sell stock? Imagine you're a treasure hunter, looking for the perfect moment to grab the gold. But how do you know when to dive in and when to walk away? This question is like a puzzle, one that many people face when they start investing in the stock market.

Let me share a quick story. There's a famous investor named Warren Buffett. He's one of the richest people in the world, but he didn't get there by chance. He became successful by knowing when to buy and when to sell stocks. He once said, "The stock market is a device for transferring money from the impatient to the patient." This means that those who wait for the right moment often find success.

So, how can you, just like Warren Buffett, learn to find the best time to buy and sell stocks? Let’s dive into it.

Problem statement

You're given an array of stock prices where each element represents the price of a stock on a particular day. Your task is to find the best day to buy and the best day to sell to maximize your profit. But remember, you need to buy before you sell.

Sample input

1prices = [7, 1, 5, 3, 6, 4]

Sample output

17

Explanation: Buy on day 2 (price = 1) and sell on day 3 (price = 5), profit = 5-1 = 4. Then buy on day 4 (price = 3) and sell on day 5 (price = 6), profit = 6-3 = 3. Total profit is 4 + 3 = 7.

Understand the problem

When you look at stock prices every day, you might be tempted to think that you should buy on the lowest day and sell on the highest day. But, it's not that simple. You can only sell after you buy, so the highest price must come after the lowest price in your array.

Brute force approach

To solve this problem, we can do the following:

• Track the lowest price: Keep track of the minimum price you've seen so far as you scan through the list of prices.
• Calculate the profit: For each day, calculate the profit you would make if you bought at the lowest price and sold on that day.
• Maximize the profit: Keep updating the maximum profit you can achieve as you go through the list.

This method ensures that you get the best profit possible by comparing each price with the lowest price you've seen so far.

Pseudocode

Let’s break down the solution into simple steps that even beginners can follow. Here’s the pseudocode in plain English:

• Start with the highest possible profit as 0.
• Start with the lowest possible price as infinity.
• For each price in the list:
  • If this price is lower than the lowest price, update the lowest price.
  • Calculate the profit if you sell at this price.
  • If this profit is higher than the current maximum profit, update the maximum profit.
• After going through all prices, the maximum profit is your answer.

Python code

Let's start with a straightforward approach where we compare every possible pair of buy and sell days.

1def max_profit(prices):
2    max_profit = 0
3    n = len(prices)
4    
5    for i in range(n):
6        for j in range(i + 1, n):
7            profit = prices[j] - prices[i]
8            if profit > max_profit:
9                max_profit = profit
10    
11    return max_profit

Explanation

• We loop through each day i and consider it as a buying day.
• For each i, we loop through every day j after i and consider it as a selling day.
• We calculate the profit as prices[j] - prices[i].
• If the profit is more than our current maximum profit, we update it.
• Finally, we return the maximum profit.

Java code

1public int maxProfit(int[] prices) {
2    int maxProfit = 0;
3    int n = prices.length;
4    
5    for (int i = 0; i < n; i++) {
6        for (int j = i + 1; j < n; j++) {
7            int profit = prices[j] - prices[i];
8            if (profit > maxProfit) {
9                maxProfit = profit;
10            }
11        }
12    }
13    
14    return maxProfit;
15}

C++ code

1int maxProfit(vector<int>& prices) {
2    int maxProfit = 0;
3    int n = prices.size();
4    
5    for (int i = 0; i < n; i++) {
6        for (int j = i + 1; j < n; j++) {
7            int profit = prices[j] - prices[i];
8            if (profit > maxProfit) {
9                maxProfit = profit;
10            }
11        }
12    }
13    
14    return maxProfit;
15}

Efficient approach

Now, let’s improve this solution to run faster. Instead of checking every pair, we can solve the problem in one pass through the prices.

Python code

1def max_profit(prices):
2    min_price = float('inf')
3    max_profit = 0
4    
5    for price in prices:
6        if price < min_price:
7            min_price = price
8        elif price - min_price > max_profit:
9            max_profit = price - min_price
10    
11    return max_profit

Explanation

• We start by setting min_price to a very high value (infinity).
• As we go through each price, we check if it’s lower than our current min_price.
• If it is, we update min_price.
• Then, we calculate the profit by selling at the current price and buying at the min_price.
• If this profit is higher than our current max_profit, we update max_profit.
• After checking all prices, max_profit will be our answer.

Java code

1public int maxProfit(int[] prices) {
2    int minPrice = Integer.MAX_VALUE;
3    int maxProfit = 0;
4    
5    for (int price : prices) {
6        if (price < minPrice) {
7            minPrice = price;
8        } else if (price - minPrice > maxProfit) {
9            maxProfit = price - minPrice;
10        }
11    }
12    
13    return maxProfit;
14}

C++ code

1int maxProfit(vector<int>& prices) {
2    int minPrice = INT_MAX;
3    int maxProfit = 0;
4    
5    for (int price : prices) {
6        if (price < minPrice) {
7            minPrice = price;
8        } else if (price - minPrice > maxProfit) {
9            maxProfit = price - minPrice;
10        }
11    }
12    
13    return maxProfit;
14}

Conclusion

Finding the best time to buy and sell stock is like solving a puzzle. It's all about spotting the right moment. By following the methods we discussed, you can become more confident in making smart decisions in the stock market. Remember, patience is key, just like Warren Buffett said.

Whether you are a beginner or someone looking to sharpen your skills, this guide should help you understand the problem and approach it with confidence. By applying these methods, not only will you learn to maximize profits, but you’ll also start thinking like a true investor.

In the end, the stock market is all about timing, and now, you're one step closer to mastering it. Happy investing!