Before invest in any stock, you must set some rules to yourself and strictly follow it. The benefit
is that you can avoid dilemma of being hesitate in making decision. There are three rules that day dreamer strictly follow to...
- Think for the loss first before gain.
People normally buy stock base on the TP ( target price) or research by either famous research house or other investor. They attracted by the fantasy upside potential gain which is too good be to true. They believe that the expertise of the research house or investor will bring them for prosperity. However, they forget that other people are not responsible to help them earn money. The TP set/ research by the experts may subject to many outside changes, difference period to achieve and present of the big player. Most of the time, the timing is not good since some people are knew earlier and the stock price not longer cheap. If you follow the buy at that time, most properly you will stuck between paper gain and loss of 10% for months. Patience will be the good friend for you at that time. As long as the company is good, the share price sure will up....
Day dreamer will set stop loss for some short term trade counter. On the other hands, day dreamer will ignore the paper loss occur in long or mid term investment as long as the reason I buy those investment are still exist. Loss 15% or 30% is doesn't matter. Day dreamer will treat it as Mega sales and buy more if there are capital. As cold eyes quotes"if the share price drop and you are not dare to buy more, most properly that is not the best investment for you "
2. Invest the company which you understand
Hard work is needed for rule no 2. What you need to do is study the company base on what analysis tool you rely on. The analysis tool can be anything range from fundamental analysis, technical analysis, TA software, internal news, management reputation,nature of industry , prey from god.（求真字？？)
Normally, Day dreamer will analysis the company by Fundamental analysis and management reputation. Identify whether the company is good and what is the intrinsic value for it. Then, find out the good buying timing by Technical analysis and analysis about equity changes happen in that company for recent time. In between, Day Dreamer will decide and set up a particular strategy for the company. Whether short trade or long term hold, or ignore. In short, the better you understand about a company, the higher chance for you to earn uncommon profit.
3. Set up strategy for every stock you invest
Cite from my own quote "As long as there are a techniques, you still can find a good deal in spite of the company is a bad apple". Every company will encounter business cyclical. Last year profit good,this year better,next year normal. With deep understanding about nature of the company business.We can take the opportunity to earn big profit by buying when the industry/business is in the recession and sell when the industry/ business is in the peak. Day dreamer define it as mid term strategy. For another examples, you need to set up cut loss point and cut gain point if using short term trade for particular stock. When the stock price reach the stop loss point you must cut it without hesitation as follow to the strategy instead of hold it for break even. You should not simply change the strategic apply for the stock.
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