Do Not Fall in Love With a Stock

In the previous articles, I wrote some pointers on trading. Please check it here http://theofwinvestor.blogspot.com/2012/09/plan-trade-and-trade-plan.html.

Based on the article I posted above, we can sum up them as follows:

1.    Do not buy a stock if it goes above the buy below price

2.    Don’t chase a rising stock 

3.    Cut your losses if necessary

4.    Plan your trade and trade your plan

5.    Keep your emotions in check and always use your intelligence

6.    Do not buy a stock if you haven’t study its technicals or fundamentals. 

Now, in addition to the above guidelines, I am issuing another set of principles for trading rules. Mind you, these are not by all means absolute and exhaustive.

http://www.flickr.com/photos/36613169@N00/388322867

Do not fall in love with a stock; she may hurt you and break your heart. I know that every investor has its own pet stock. For example, I have a friend who upon buying his maiden stock had chosen Jollibee for the reason that it’s one of his favorite fast-food chains and it is popular. He might be correct and Jollibee stock might indeed go up. However, when things turn ugly, one must be prepared to detach himself from the stock and choose another one.

Your main purpose in stock market is to make money.

Buy stocks in single digits RSI. This is for stocks with extreme selling pressure. Single digit RSI doesn’t mean that the stock will go up in the next few days after a tremendous selling pressure. Stocks don’t go down forever.

Cut your losses. If your trading plan doesn’t pan out in the direction you wished, be courageous to cut your losses. In any trading plan, you must have an entry point, an exit point and a cutloss point. If the stock is going up, you must have a trailing stop so that you can preserve your profits.

You should preset your order at your entry/exit price so that in case the stock is near that price, you can easily press the button once it hit the price.

Buy stocks with good fundamentals only.