Continuation of part 10
Buy At New Highs: Believe it or not, but buying at new highs is the most profitable way to make money in the market. Most people believe that they must buy at the lowest price or in the valley. That couldn’t be further from the truth. By buying at the new high you are moving with the main trend.
Sell At New Lows: In a similar fashion, selling or selling short at the new low is the best possible position to exist the stock. It confirms that the trend has changed and gives you ability to exit your trade at a good price. More importantly, it allows you to trade with the trend and not against it.
Never Commit To Anything: Never attach your forecast to any fixed outcome. If you do, you will shift from the position of power to the position of fear and hope. Opening up your trading strategy to risk and losses. Instead, remain flexible and move with the market even if your forecast indicates otherwise.
Move Stop Losses: As the market or any given stock continue to move with the main trend you must continue to move your stop losses up or down to avoid unexpected developments and to protect your profits. By doing so you eliminate unnecessary risk of losing money.
Don’t Be Afraid To Be Out Of The Market: There is absolutely nothing wrong with being out of the market completely. Sometimes for prolonged periods of time. It is better to sit on the sideline than to lose money. Particularly when the trading situation or the direction of the financial instrument you are looking at is unclear.
Don’t Wait Until The Trend Changes: DO NOT hold your losing position in hopes of a trend change. That is how people lose most of their money. For instance, the bears who have been holding short positions throughout 2013 have been decimated (even though they will eventually be right). Once again, always move with the main trend.
Get Out As Soon As You Realize You Have Made A Mistake: Even if your in-depth research shows one thing, the market might do something completely different. At times like this you might realize that you have made a mistake. Do not hold your position in hope that the market will reverse itself and allow you to exit at a better price. Liquidate your position immediately.
Always Wait For A Confirmation: Do not establish position until and unless your work is confirmed by the market itself. In most cases the market will do so by setting new highs or new lows. Only after receiving such a confirmation should you establish a trading position based on the main trend of the market and/or based on your own research work.
Avoid Hope & Fear: This is probably the main reason why people lose money in the stock market. They trade and/or invest on emotion rather than technical, timing or fundamental work. They hope, pray and fear instead of following exact steps. Do not be one of these people. Never trade based on hope or fear. Follow your rules.
To Be Continued…..
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Stock Market And 3-Dimensional Analysis (Part 11)