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Rules For Stock Market Success

rules for stock market success

Want to profit from the stock markets? If you strictly adhere to all of our rules (not just the ones you like), you will see a material improvement in the performance of your stock investments.

Rule - 1.

Sales, Earnings, ROE

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Consider buying stocks with each of the last three years' earnings up 25%+, return on equity (ROE) of 17%+ and accelerating sales.

Rule - 2.

Recent financials

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Recent quarterly earnings and sales should be up 25% or more.

Rule - 3.

Tips, Rumours

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Never buy or sell stocks on tips or rumours… never.

Rule - 4.

The 8% Rule

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To avoid huge losses, cut every loss when it’s 8% below your cost. Make no exceptions. Never ‘average down’ in price.

Rule - 5.

When to sell

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Sell when the stock reaches new lows along with high volumes.

Rule - 6.

Follow the markets

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Buy when market indices are on an uptrend. Three out of every four stocks follow the market, either up or down. Reduce investments and raise cash when general market indices show five or more days of high selling volumes.

Rule - 7.

Leading stocks

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Buy leading stocks in the leading industry groups. Nearly half the price rise/fall of a stock is because of the strength/weakness of its industry group and sector.

Rule - 8.

Management ownership

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Invest in companies with high promoter/management ownership of stock.

Rule - 9.

Read technicals

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Buy stocks breaking out in heavy volume from chart patterns like cup with a handle, flat base, double bottom, etc.

Rule - 10.

Institutional holding

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Select stocks with increasing institutional investment over recent quarters.

Rule - 11.

Current quarter

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Current quarterly after-tax profit margins should be improving, near their peak and among the best in the stock's industry.

Rule - 12.

Ignore dividends, PE

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Don’t buy because of dividends or PE ratios.

Rule - 13.

Superior product/service

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Invest in companies with a superior new product or service.

Rule - 14.

Entrepreneurial companies

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Invest mainly in entrepreneurial companies.

Rule - 15)

The IPO rule

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Companies’ prices rise the most during 8 years immediately after the initial public offering (IPO). Pay close attention to companies which have had an IPO in the past 8 years.

Rule - 16.

Buyback

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Check companies buying back 5% to 10% of their stock.

Rule - 17.

New management

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Check companies with a new management.

Rule - 18.

The market is always right

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Don’t try to bottom guess or buy a stock on its way down. Never argue with the market. Forget your pride and ego. Don’t back your judgements until the action of the market itself confirms your opinion. Don’t let your emotions enter your investment decision.

Rule - 19.

Large or small caps

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Find out if the market currently favours large cap or small cap stocks.

Rule - 20.

Monitor your investments

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Do a post-analysis of all your buys and sells. Post on stock charts where you bought and sold each stock. Evaluate and develop rules to correct your major past mistakes.

 
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