| If you want to become a successful, profitable share | | | | 8. A visual look {the old "eye ball test"} at the most |
| trader in the stock market, you need to implement a | | | | recent chart, preferably over the last month's |
| few basic guidelines. | | | | performance. |
| Listed below are a few ideas you might find | | | | Again if in any doubt drop the share till next time; |
| invaluable. | | | | just add it to your watch list. |
| 1. Adhere to your written down plan for buying and | | | | I have around 30 to 40 companies currently on my |
| selling shares. I.e. The amount you are going to | | | | watch list. I whittle them down to around 3 -4 using |
| spend, the amount you can afford to lose if things | | | | those basic criteria above. |
| go the wrong way (2% of the total value is a good | | | | It is not a hard a fast criteria, make up some of your |
| guideline) | | | | own preferences. |
| The % profit you want to make, after allowing for | | | | Mine is just to give you a very basic idea to help you |
| brokerage etc. | | | | get started. |
| The time frame you would like. (Not always possible) | | | | The Law of Probabilities. |
| for the total transaction. Is it short, medium or long | | | | When it all boils down to it, there are no guarantees |
| term? | | | | we are just working on the "Probability" of the share |
| The number of shares you want. (This depends also | | | | price going upwards. |
| on your capital constraints.) | | | | NB If the share is going "Sideways" it is only 50- 50 |
| Diversify don't invest just in one area. Spread your | | | | probability .don't bother this is a share going sideways |
| risk over different types of companies. | | | | and you might as well toss a coin because you are |
| 2. The last high in the share price have all been higher | | | | now gambling. |
| that the one the day before. Do this for a minimum | | | | Wait a few days and review it then. |
| of three days to five days consecutively.] | | | | If a share is going "Downwards" I use the probability |
| 3. Plenty of liquidity meaning a good volume of shares | | | | of 70% of it continuing that way, 20 % chance of |
| has exchanged hands recently. | | | | going sideways, 10% going upwards. |
| 4. Buyers outnumber sellers. If the other way round, | | | | The next probability I use for an "Upwards" moving |
| the share price will drop downwards for sure. | | | | share price is 70% to continue upwards and 10% |
| 5. Recent news or rumours of news .i.e. Takeovers, | | | | probability of going sideways and 20% probability of |
| profits etc. Only good news of course. | | | | it downwards. |
| 6. Directors buying shares {not selling} in the last 2 to | | | | Remember these are only guidelines; if things don't |
| 3 weeks. | | | | go to plan that is when you implement a "stop loss" |
| 7. The "Trend Lines" show a definite trend upwards. | | | | {see past article if you want to know more on this. |
| If in doubt don't trade. | | | | |