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Rules of the Trading

I am no longer a fundamental investor, but use much of the technical data to make my purchase and sell decisions. It's pretty hard to become a prudent investor making decisions solely based on facts and data, not based on emotions.

Rules of the Trading
1.  I have come to realize during the recent bear market that I should have cut my losses short at 10%. The IBD recommends cutting losses at 7% to 8%, but being in the highly volatile technology market, I have decided to cut my losses at 10%
2.  Understand that the great stocks often do pull back after cup-and-handle breakout. Many of the market's greatest winners do pull back before blasting off to huge gains.
3. Value, growth, vs. income investing?
Do you believe in buy-low-and-sell-high, or buy-high-and-sell-higher strategy? I believe latter.
4. How is the Dow Jones industrial average calculated?
The Dow is essentially the average price of its 30 component stocks if they had never been split, issued dividends, or undergone major changes such as spin-offs or mergers during the time they were listed in the index. To get from current stock price levels to the larger index number, a number called the "divisor" is used.

Buying is just half the story!
Major sell rules every investor must keep

  • Stock falls 7%-8% below your initial purchase price
  • Stock goes on a climax run after a long advance
  • Stock pierces 50-day moving average on heavy volume, fails to return above it
  • The market shows signs of a top
  • Stock breaks out of a late-stage base, breakout fails
  • Stock hits new highs on low volume
  • Sell laggards in your portfolio, pyramid up on winners