Saturday, January 14, 2012

What to look for

Link on citywire, which asks what to look for in buying a share. Comment #6 reads:
here are my six trading rules, as u can see only one refers to stock selection.

Rule 1
Fundamentals gets a share into your buy list, they will not get you out of a bad trade. Fundamentals are useful but remember that how a market should react and how it does react are two very, very different things. Don't get married to a fundamental opinion if the price does not confirm it.

Rule 2
If you have to look, it isn’t there.
Forget your college degree and trust your instincts. The best trades jump out of nowhere and create a sense of urgency. Take a deep breath, then act quickly before the opportunity disappears.

Rule 3
Price has memory.
What happened the last time a stock hit a certain level? Chances are it will happen again. Watch trades closely when price returns to a battleground.
The prior action can predict the future.

Rule 4
BIG LOSSES rarely come without warning.
You have no one to blame but yourself. The chart told you to leave, the news told you to leave and your mother told you to leave. Learn to visualize trouble and head for safety with only a few bars of information.

Rule 5
Support/Resistance is the key to the market
This is one of the only technicals that the professionals keep coming back too. Where are the support and resistance points? To determine their validity, watch the strength of the price at them.
Buy at support. Sell at resistance.
Trend has only two choices upon reaching a barrier: Continue forward or reverse. Get it right and start counting your money

Rule 6
Bulls live above the 200-day moving average, bears live below.
Bulls live above the cloud, bears live below.
Are you flying with the birds or swimming with the fishes? The 200-day moving
average divides the investing world in two. Bulls and greed live above the 200-day, while bears and fear live below. Sellers eat up rallies below this line and buyers come to the rescue above it.

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