The Circle Of Profits

Continuation from yesterday…..Buy Low, Sell High, Go Short & Cover Investment Strategy Rules)

Always keep detailed technical charts, long-term and short-term, for all of your stocks and the overall market. These charts will tell you when stock prices are about to break down.
Liquidate your long positions and go short as soon as the daily, weekly or monthly trends change from bull to bear. Typically, the exact points of exit will be based on your overall trading strategy and risk profile.
Go short at the same time and price.

These strict rules allow us to accomplish a number of things. First, they force us to be vigilant as we continue to scan for possible market, industry or stock specific corrections. Minimizing our risk profile in the process. Second, the rules above force us to sell our long positions at the onset of corrections. Preventing unnecessary and at times massive losses. Finally, these rules give us the ability to profit on the downside should a significant move down develop fully.

Rule #3: Cover Your Short Positions & Go Long When Technical and Timing Indicators Confirm (Trading)

The rules found here are the exact opposites of Rule #2.

Always be ready to cover your short positions and go long if technical indicators associated with the underlying securities suggest that stock prices are about to break out. No matter how bleak the underlying fundamentals are at the time.
Always be ready to cover your short positions and go long at bear market or correction bottoms. No matter what you believe will happen to the overall economy in the meantime.
Always be ready to cover your short positions and go long when the underlying stock prices have experienced massive drops and could now be considered oversold or selling well below their intrinsic value. This rule applies to all market conditions. Bull and bear.
Always keep detailed technical charts, long-term and short-term, for all of your stocks and the overall market. These charts will tell you when stock prices are about to break out.
Cover your short positions and go long as soon as daily, weekly or monthly trends change from bear to bull. Typically, the exact exit points will be based on your overall trading strategy and risk profile.
Go long at the same time and price.

As you can very well imagine the rules above will complete the transaction and bring us back full circle. First, the rules above will help us with identifying market or stock specific bottoms. Giving us the ability to come in and assume long positions at giveaway prices. Second, these same rules will help us find stocks that are about to surge much higher and in many cases at X multiple to the market. Giving us a fighting chance to walk away with massive gains. Finally, the rules above force us to change course at exactly the right price and time. Removing all of the emotional aspects associated with investing out of the picture.

Here is another way to look at the proposed Rules #1-3. They create a full circle of sorts. A circle that allows you to take an initial position at or near the bottom and ride what should be a massive rally all the way up into its eventual overvaluation bubble. Only to exist and go short as the stock price begins to collapse. In other words, this setup allows you to profit on both sides of the move. All while maximizing your returns and minimizing risk in the process. The best part is; your initial entry point on this cycle can be at any point. For as long as you understand exactly where on this proverbial circle you are coming in.

To Be Continued On Monday…..