While we can't take credit for these rules (many are as old as the market itself), it's important to use this knowledge to improve your success in this vicious game that is the stock market.

Before opening any position:

Check the overall market indicators for direction. Analyze the sector and industry in which your issue resides. Study the performance of similar groups and make sure it coincides with your outlook. Choose only those stocks with the most favorable technical formations. Once you have a candidate in mind, do your homework! Know the company and the calendar; upcoming events, earnings dates, and scheduled announcements.

Before entering your order:

Double-check the chart! Make sure you are absolutely ready to own the issue at the target price. Don't buy a stock that's in a downtrend (Stage 4) and never open a position right after good news, especially if the chart shows a significant advance prior to the announcement. Never buy a stock just because it appears cheap after a big sell-off. Always use simple proven techniques. Develop target prices for potential plays and take the human factor out of trading by using LIMIT and GTC orders. When news or events change the character of the play, make the necessary adjustments.

After you have established the position:

The #1 rule: Know your exit and use a mental or mechanical stop. Stay informed by monitoring all the news and announcements affecting your position. Never hold a stock in an established downtrend no matter how fundamentally sound the company appears to be...(Hope is an expensive emotion).

Closing the position:

Determining when to exit a play is a matter of personal preference and you are the only one who can decide how you will trade. The best advice is, be consistent. If you find that you're often buying and selling in similar situations, something is wrong with your system. The most painful lesson comes when you close losing positions. It's very difficult to learn to exit losing plays early but the simple fact is: There is no reason to hang on to a losing position when there are so many other profitable plays that deserve your time and money. Accept your losses, learn from your mistakes (evaluate each one critically) then move on! Success will come when you create a favorable balance between hard work and patience. Too many traders give up after a few losing plays, long before they have time to learn (and absorb!) the various methods required for profitable trading.