Continuation of part 9
Shortcut Two: Trading Techniques
The other way to avoid problems and/or to reduce risk when the lattice structure of the market is not yet known is to implement a strict trading regiment that would help you avoid large mistakes. By implementing strict trading rules and procedures you are able to eliminate all guess work out of the equation. In other words, while the 3-DV analysis gives you the ability to predict the markets, strict trading rules make sure you pull the trigger at the right time.
The rules below are a very simple strategy of getting in and out of stocks. Yet, it produces very powerful results while minimizing risk when you combine it with the fundamental, 3-DV and triangulation analysis described above. First a few rules.
Avoid Low Priced Stocks: While it is possible to make a large amount of money with these stocks, for the most part these stocks remain at low levels for a very long time. Sometimes forever.
Avoid Slow Trading Markets or Stocks: These are the financial instruments that are stuck in a trading range. Do not invest in them until and unless the trend is definitely broken either to the upside or the downside.
Concentrate On Fast Moving Markets or Stocks: This is where most money is made over the shortest period of time. Once the primary trend is identified and the 3-DV analysis work is done, buy the best stocks in the fastest moving industry.
Never Guess: Take the guesswork (gut feeling) out of your decision making process. Develop strict trading rules that are followed 100% of the time. While the analytical framework described above is followed, you should never guess if you got it right. Let the market and your trading rules put you in and take you out.
Always Follow The Main Trend: You will always make money if you follow the main trend. Either up or down. Remember, stocks are never too high to buy if the stock market is going up and they are never too low to sell if the trend is pointing down.
Always Use Stop Losses: I cannot overstate this enough. Always use stop losses to protect your capital. Even if you reach an advanced level in the 3-DV analysis described above, always use stop losses to make sure your work is correct. Let the actual market prove if you are right or wrong. In the meantime, your capital base will remain save.
To Be Continued…..
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Stock Market And 3-Dimensional Analysis (Part 10)