Always know why you are buying.
You may have found already, it is very easy to buy stocks, and to keep
buying till you've no money left in the kitty. Much harder to sell.
I can illustrate this with the MAY chart may.gif
Do note please though, these emails are not recommendations to buy or
sell. They are meant to follow on from Gann classes, to teach you so you
can make your own decisions. You know that already I'm sure, but worth
If you are trading, never buy a stock below the moving averages. Indeed
you could be looking to short any break into new lows. Stocks make new
lows because someone knows there is further bad news on the way. Mostly,
stocks fall faster than they rise.
If you are buying to invest, say with a longer-term horizon, (2 years or
more) the same rules about moving averages should be applied. But on
occasions, stocks do become way oversold; as MAY looks now. So looking
two years ahead, now could be a buying time, if you wanted to hold that
long. Gann can be helpful here, by measuring the repeat range on the
weekly for a possible low price and change of trend.
A third option, is to do what I do mostly, as per the longer-term
portfolio, and be patient enough to wait for the stock to form an
accumulation zone (it may not of course), then buy on the breakout. Gann
identified this first. This helps avoid having your limited funds in
stocks going sideways, lowering overall potential performance. There are
always stocks in the market readying themselves for a breakout.
May - PDF