Continuation of part 11
Avoid Loss Averaging: Contrary to a popular believe, it is not a good idea to buy more stock when the price declines after your purchase. Buying more at a discounted price means you are going against the main trend and not with it. While you lower your overall purchasing price, the main issue remains. The main trend is down. Instead, you should average up when the stock price is going up. That way you are going with the trend.
Now that we have looked at the overall rules to the profitable stock market operations, let’s take a quick look at a simple set of specific trading rules.
Rules For Trading In Stocks
RULE 1: Buy at new high prices or old top levels.
RULE 2: Buy when prices advance above old low prices.
RULE 3: Sell when prices decline below old top levels or high prices.
RULE 4: Sell at new low price levels.
RULE 5: Wait to buy or sell until prices CLOSE above old highs or below old lows on the daily charts. Closing price is incredibly important.
RULE 6: Use stop losses. Your capital and your profits must be protected at all times with STOP LOSSES. Implement stop losses at 1-3 points above or below your original price and at the time of the original trade.
RULE 7: Do not lose money.
In this section we have looked at 3-DV analysis, triangulation and various trading rules associated with trading the markets. By performing 3-Dimensional analysis for the DOW between 1994-today I have demonstrated without a shadow of the doubt the hidden structure within the stock market. Once that structure is fully understood (well, even before), an exact forecasts could be made. Once the analyst understands the lattice structure of the market, he can calculate it 1 year, 10 years or 100 years into the future with astonishing accuracy.
Further, we have looked at triangulation and various trading rules to minimize the risk associated with 3-Dimensional analysis. By following all the rules described above, any stock market participant should be able to profit greatly. After all, an analyst using the work above in an appropriate fashion should know what the market will do and should act accordingly. In the next section we will look at another powerful tool to time the market with great precision.
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Stock Market And 3-Dimensional Analysis (Part 12)