I am constantly learning about the stock market. Thus, this is a work in progress. Additional lessons will be added as I learn more.
1) In general, if a sector or industry is performing poorly and generating losses, 80% of the stocks in that sector are also performing poorly and generating losses.
2) Look for sectors that have generated gains over the intermediate and long term.
3) Instead of the daily candlestick chart, you can also look at the hourly candlestick chart. This will help you to better see the action during trading hours.
4) If you are thinking of buying today, do check today’s opening price for confirmation. It is good if the stock opened at or near the previous day’s close.
5) It is better to not hold a stock through the earnings report or the possibility of news coming up. These things mess up with your strategy and stock price setup. Also, the market always adds positive expectations to the price but fails to (doesn’t) discount negative possibilities.
6) After your strategy leads you to buy, deciding when to sell a stock is hard. Thus, how about selling a decided number of days after buying?
I mean, if your strategy is right, it will have been profitable within that time frame anyway. This fixed holding time can be determined by seeing how long a momentum lasted in that stock’s history on average.
A more time-intensive and stressful alternative would be to simply watch the chart every day after buying. In other words,
“Monitoring the progress of the trend to find signals that would indicate whether the buying or selling forces are continuing the trend allow profits to run and close frizzled trades with minimal losses.”
7) If you bought a stock but it now shows sell signals, do not be afraid to sell it. Do not think that you will wait and prevent embarrassment. It is okay to sell now and buy later when the buy signals reappear. If you sell, you only embarrass yourself. If you hold and the stock keeps plummeting, you will embarrass yourself and your money. To put it the other way,
“Do not look back. Make the best decision you need to with the evidence presenting itself at the time. For every instance where looking back creates anguish, there will be a dozen times that you are thankful for taking the right action when you did.”
8) Keep your stop loss narrowly below your buying price when buying. Once you begin to gain, gradually increase the stop-loss value. In other words, your stop-loss should be trailing your gains and cutting your losses quickly.
9) A change in the trading range indicates a change in market sentiment. This change often precedes a change in either the direction or the slope of the price chart.