Rule Of Investing

Every investor should have preset rules to follow in their investment decisions. There is no perfect formula that will guarantee success as unforeseen variables can affect the performance of a stock and the overall market. However, there are general rules and considerations that can enhance probabilities of success.

General Factors to consider before you invest:
• Health of the Overall Market
• Fundamentals of the Company
• Trend of the Stock (Basing, Advancing, Topping, Declining)
• Technical Indicators


Every investor should protect themselves with strict Buy and Sell Rules.
Adhere to those rules that make the most sense for your philosophy and be consistent in executing the decisions. Applying a methodology will help to manage the two most extreme emotions in the financial markets – greed and fear.


It is vital to understand the market’s direction:
 You do not want to buy stocks when the averages are in a Bear (down) market.

 You do not want to be in cash, or betting stocks will go down in price when the NASDAQ, S&P 500 and Dow indexes are in a Bull (rising) market.


Most stocks follow the general market’s trend:
 Stocks tend to rise when the NASDAQ, S&P 500 and Dow industrials move higher.

 Stocks tend to fall when the major indexes trade lower.


An Ideal Strategy is:
 In a Bull Market, buy stocks as close to the pivot point as possible which are breaking out of solid bases on surging volume.

 In a Bear Market, stay on the sideline in cash to avoid losses.


#1 RULE: PRESERVATION OF CAPITAL: USE STOP LOSS PROTECTION:
 Sell stocks that fall 7% - 8% below your cost. NO EXCEPTIONS
 There will be times this stop-loss rule will exit you from your position and the stock then turns around and takes-off to the upside. These situations are the price one pays to insure against severe losses.