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You haven’t made any money until you actually sell your holding for a profit.

Contrary to popular belief, the best time to sell is when the stock is on the rise.

You will never be able to time the exact peak of a stock.

The next best thing is to sell near the top while the stock is still on the way up.

If you wait until it peaks and starts coming down, then it’s highly possible that you will be late and suffer massive corrections.

Averaging up is when you buy more stock after an initial purchase as it moves up in price.

Do this when you have bought at a correct pivot point and the price has increased a couple of percent from your purchase price.

The additional purchase(s) should be smaller than your original.

You are going to make a lot of mistakes.

Learn from them.

Analyze every single one of them so you can pinpoint what went wrong.

Write self-correcting rules so you can avoid the same mistakes in the future.

Having a profit and loss plan is vital to your success.

You must know when to cut your losses as well as when to take profits.

Here are some buy rules from the author:

• Concentrate on listed stocks selling for over $20 per share with some institutional acceptance.
• Insist that the company has increased earnings per share in each of the past 5 years and that the current quarterly earnings are up at least 20%.
• Buy when the stock is making or about to make a new high after emerging from a sound base. Volume should be up 50% or more from the stock’s daily average.
• Don’t buy a position (or add to it) more than 5% past the pivot buy point.

In general, sell a stock when it is up 20% from the buy point, as it is advancing. There is an exception: if a stock increases 20% in under 3 weeks, hold it for at least 2 months and then assess to see if it can go more.

Sell any stock that drops 8% from your purchase price.

Sell based on unusual price and volume action. If the smart money is selling, follow suit.

A leading stock may surge in price for up to 10 days on the daily chart right before it tops. When this happens, the weekly spread is usually greater than any previous week since the start of the move.

When a stock has increased steadily for several months off a proper base, then closes for the day with a larger price increase than any other day since the start of the increase, it signals it is close to peaking.

The ultimate top often comes with the heaviest volume since the start of the move up.

Also watch for gaps after a price increase spanning several months.

Heavy daily volume without price increase signals distribution and you should follow suit.

Sell if a stock runs up 25% or more for one or two weeks after a stock split.

A stock can be close to topping if there is an increase in the number of consecutive down days.

Sell if a stock breaks through its upper channel line after a big run-up.

If a stock price increases but volume declines, it signals the smart money losing interest.

If the stock closes near or at the low of the daily price range.

New highs of a third stage base rarely hold. Consider selling before it drops.

When you notice selling at the top, the next recovery will be weak in volume or will last fewer days.

This is a weak rally. Sell on the second or third day of this weak rally.

When there is an 8% or more decline from the peak, take notice. Compare it to previous price action to see if this correction is normal or perhaps it is signifying the end.

Consider selling when IBD’s relative price strength drops below 70.

Also consider selling if there is no confirming price strength by other industry members.

When a stock's close for the week is below a major established trend line, it is known as breaking support. Sell if this happens, especially if it is on a large increase in volume.

*Note that trend lines must span at least several months otherwise they are not valid.

If a stock makes its largest one day price drop since the start of the advance, it is an indicator to sell.

Sell if a stock breaks down on its largest weekly volume over the last several years.

Take notice if the 200 day moving average starts a downward turn.

If a stock closes below the 10 week moving average and lingers below it for two months or so, consider selling.

Take some profit when you are up 20%, 25% and 30%.

Don’t sell at 25% and 30% if the stock had a 20% surge within three weeks as these could be huge leaders and should be held for maximum profit.

In a bear market, hold less positions, take gains at 15%, and cut losses at 3%

Sell when there is an overabundance of optimism.

Sell when the percentage increases in quarterly earnings slow down by 2/3rds or more for two consecutive quarters.

Consider NOT selling on bad news or rumors. It may just cause a temporary fluctuation.

Your aim is to buy the best stock at the best time. Once you’ve done that, you must be patient enough to hold it until you have been proven right or wrong.

When you first buy a stock, your stop-loss is set to 8% below your buy price. Once it moves up, you may raise your stop-loss, but never raise it above the low point of the first normal correction. This will save you from getting shaken out.

Once the stock is up 15%, it should not be allowed to drop back to a loss, however, you do not want to chase it up with your stop-loss otherwise you will be forced out by a natural connection.

Major advances take time. Don’t take profits during the first 8 weeks unless you see serious signs of trouble.

When you have a stock that advances 20% or more in under 8 weeks that is high quality with institutional support, hold it through its first short-term correction of 10% to 20%.

The aim of the game is not just to be right, but to make big money when you are right. The first two years of a new bull market is the best time to do this. You must have the courage and patience to sit tight through the slumps when you’re confident you have picked a winner.

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