| I'm sure you've heard the old Wall Street saying, | | | | set of criteria first and always exit the trade quickly |
| "Buy Low, Sell High." | | | | to reduce your loses if things aren't working as |
| But have you ever heard, "Buy High, Sell Higher?" | | | | anticipated. |
| Some of the most successful stock traders practice | | | | Before making a trade, you'll need to look at the |
| this unorthodox approach. | | | | overall trend of the markets. If it's going up them |
| David Ryan practices and preaches this concept, | | | | that's a positive sign because individual stocks tend to |
| which helped him come in first place in the U.S. | | | | follow in the same direction. |
| Investing Championship with a 161% return back in | | | | To further your success with individual stocks, you |
| 1985. He also came in second place in 1986 and first | | | | should make sure that they are the leading stocks in |
| place again in 1987. | | | | leading industries. |
| Ryan is a student and fund manager for William | | | | From there, you should look at the fundamentals of |
| O'Neil, the investor and businessman who started the | | | | a stock. Find out if the EPS or the Earnings Per Share |
| successful financial paper "Investors Business Daily." In | | | | is improving for the past five years and the last two |
| O'Neils popular stock market trading book, "How to | | | | quarters. |
| Make Money in Stocks," O'Neil recommends the idea | | | | Then look at the RS or Relative Strength of the |
| of buying high and selling higher. | | | | stock. The RS shows you how the price action of |
| O'Neil discovered this by studying the Dreyfus funds. | | | | the stock compares with other stocks. A higher |
| Every stock they picked first made new highs. O'Neil | | | | number means it ranks better than other stocks in |
| built his portfolio looking for stocks that behaved the | | | | the market. You can find the RS for individual stocks |
| same way. | | | | in Investors Business Daily. |
| But before you can appreciate this practice, you'll | | | | A big plus for stocks is when institutional investors |
| have to understand why O'Neil and Ryan disagree | | | | such as mutual and pension funds are buying them. |
| with the traditional wisdom of buying low and selling | | | | They will eventually propel the price of the stock |
| high. | | | | higher with their volume purchasing. |
| You are assuming that the market has not realized | | | | A look at just the fundamentals isn't enough. You |
| the true value of a stock and you think you are | | | | need to time your purchase by looking at the stocks' |
| getting a bargain. But, it may take months or years | | | | technicals. Interpreting stock charts will help you |
| before something happens to the company before | | | | pinpoint safe entry price ranges. The five reliable |
| there is an increase in the demand and the price of | | | | bases or patterns to enter a stock are the cup with |
| its stock. | | | | handle, the flat base, the flag, the rounded bottom |
| In the mean time, while you wait for your cheap | | | | and the double bottom. |
| stocks to prove themselves and rise, stocks making | | | | When price breaks out of these bases, you should |
| new highs are making profits for traders who buy | | | | make sure that volume for the stock also surges. |
| them right now. | | | | Old trading beliefs are hard to change. But once you |
| When a stock is making a new 52 week high, | | | | change them to more effective and proven ones, |
| investors who bought earlier and experienced falling | | | | the sooner you will be on the way to trading |
| prices are happy for the new opportunity to get rid | | | | success. Remember, Dreyfus build their mutual funds |
| of their shares near a breakeven point. Once these | | | | by purchasing stocks after they made new highs. |
| investors leave, there will be no more selling pressure | | | | The legendary private investor Nicolas Darvas who |
| or resistance from them to prevent the stock from | | | | wrote "How I Made $2,000,000 In The Stock |
| taking off. | | | | Market" did the same back in the late 1950s'. |
| Perhaps you are scared to buy a stock at a high. | | | | Take the time to study and understand why you |
| You're thinking it's too late and what goes up must | | | | should buy high and sell higher - once that concept |
| come down. Eventually prices will pull back which is | | | | sinks in, you may start to wonder how you could |
| normal, but you don't just buy any stock that's | | | | follow any other approach. |
| making new highs. You have to screen them with a | | | | |