Investing 101 Lesson #5: Summary

A major key to being a successful investor is knowing how to manage your portfolio. As investors we are going to make mistakes when buying or selling stocks. The key is to take profits when you have them and keep your losses at a minimum. To help you with your money management skills we have a list of penny stocks and can provide you with a stock market quote.

From my experience here are a few good points to remember when buying or selling stocks:

• If you buy a stock and it drops 5% to 8% below your purchase price consider selling it and take your loss along with swallowing your pride (no one is going to be right all of the time). Yes the stock price may reverse on you and go the other way but it also may drop another 10%, 30%, 50% or even more. I would have been much better off in my early days of investing if I would have adhered to this rule.
• Buy a stock when the price breaks out of a consolidation period such as the Flat Base or Cup with a Handle pattern especially if it's accompanied by increased volume.
• Watch out for the Climax Top out of a Parabolic Move and the Double Top patterns as well. Remember these patterns indicate a stock may have peaked and could be in for a dramatic sell-off. Don't get greedy as an investor, if you buy a stock and it quickly doubles or triples in two weeks or less consider selling it as the stock may drop even faster on its way back down.
• Also pay attention to the Moving Averages especially if a stock breaks below its 50 day moving average. This could lead to a test of its 200 day moving average if further selling continues.

There are many more I could type in here but remember the KISS principle. The more you analyze things the more complicated your decisions will become.

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