A lot of people in this forum are making mistakes such as no plan, no risk control and too much emotion. If you want to succeed in the stock market, you should overcome these weaknesses.
The first thing is to know yourself: what kind of an investor you are. If you are a long-term investor, never come to this forum. If you are daily traders, I feel sorry for you since most of you will lose your shirt finally. My advice is given to short-term and medium-term investors.
1. Bearing a plan before you enter the market. The preparations you should do:
•Screening stocks you prefer. My favorite is EPS growth>30%/year in the next 5 year, high volatility, 500,000-2,000,000 daily volume.
•Finding the short ratio at www.shortsqueeze.com. The higher the ratio, the better.
•Choosing 10-20 stocks to monitor, pay attention to those that go up much faster when the market is in small bounces.
2. When entering:
•Be patient to wait for the market to hit the bottom (your patience should be like fishermen’s). It’s not difficult for some of you to judge the bottom.
•Buy 5-10 stocks. Never cut loss unless there is bad news from the company because you buy the bottom.
•Determine how long the rally lasts. There are usually a few of rallies (1-2 weeks), 1-2 medium rallies (3-4 weeks) and 1 big rally (over 1 month) every year. Some guys in this forum have the feelings, get help from them. You can undo the small rallies if you want to. A medium or big rally is always months apart from each other.
3. When getting out:
•The market is losing steam (like now). Imagine you are another speculator or an instition who misses this rally, will he jump in if the market is at current level? If answer is no, get out. Don’t be too greedy in the last stage of a rally.
•If you don’t want to do as above, set stop orders to keep your profit. I promise you won’t do better than the first one.
•Get out completely. The stocks you choose are highly volatile and will drop fast when the market gets down.
•redo the step 1.