Trading Strategy!!

Name of the game is discipline, discipline and more discipline!! Basically if you change your rules in the middle of the game you will tend to suffer. So basically formulate the rules and stick with it.

How to select stocks to follow?
Basically qualify your stocks based on your investment philosophy. Once they meet all thier criteria put them in your watch list.


When to buy?
Have artificial buy in price for each stock. Say a stock is trading at $5.25, make a rule that you accumulate the stock if it falls below $5.



How to buy?
If you have a large amount to invest, donot invest all your money on a freefalling stock. Initial buy should be 50% of your funds allocated, then as the stock falls futher average down in increments of 25%. Keep averaging down even monthly as long as stock is below the pivot point you assigned in the previous step.
Once the stock goes above the pivot point let it run, donot ever chase stocks.

Diversification?
You build diversification over time and not concurrently. As you establish positions in stocks, once they go above your pivot point you need to start investing in other stocks. Thus over a period of time you will have positions in many stocks. Recommended to have optimal diversifications of 3 stocks at a time.





When to sell?
1. Atleast give a stock a year to give you good returns. Never sell before a calendar year because it takes time to turn around something.
2. Sell if you attain or exceed fair market value, Rule 1 precedes this rule.
3. Never sell already established positions because you found something undervalued. Every position you take need to be built up from the ground up. Once a position is built it must be held for atleast 1 year.