- Know Thyself: Are you looking to supplement your regular weekly income or do you have a longer term time horizon in mind? Are you the kind of person who can deal with the risk inherent with holding positions over night? Do you see taking a loss as a negative reflection on your self worth?(We will be allotting resources, in upcoming posts, to addressing this and many other essential aspects of intelligent speculation & investing).
- Refrain from engaging with the market until a tradable pattern has revealed itself. We have found from experience that this usually requires sitting on your hands until around 10:35 AM.
- That being said, if you are carrying a winning position overnight which the next morning opens in your favor, you must be prepared to know what your exit plan is! Please note that the proper decision is often dictated by the present overall market environment..which at this very moment, 11/3/13, weighs in favor of being more aggressive about booking profits. We endorse various risk management practices like selling 1/2 and then watching intraday activity before deciding on either getting out of the other 1/2 or buying back the 1/2 you just sold and perhaps adding even more to your position! We call this "Going back to the well"
- Never, ever ever ever ever buy more of something for the sole purpose of "averaging down"!
So, for example, if you buy a stock at $10, hold it over night, and it opens at $5 the next morning, WE DON'T just buy it at $5 for the purpose of making our average price $7.5. We follow it in Stealth Mode until we're confident that the bleeding/carnage from whatever caused the drop has been stopped. In future postings, we'll go into greater detail(strategy & psychology) on how to play "stocks that are rocked"