Pauline Yong Blog
Rules For Trading In Stocks
In November last year I said the market would turn around by 30 Nov 2012 and the market did recovered around that time. When it comes to trading, technical analysis can help us to make some forecast base on how prices behave in the past. In today's article, I would like to share with you 3 stock trading rules by W.D Gann, in his book titled "45 Years In Wall Street".
Rule No.1: Determine The Trend
Always identify the primary trend first. This can be easily identify using trendlines and moving averages. As a rule of thumb, 10,20 MA are for short term trends, 50, 100 MA medium term and 200 MA for long term trend. When the price is above the 200 MA or the long term trendline, it shows that the stock is in a long term bull trend such as the diagram below.
Rule No.2: Buy at Single, Double or Triple Bottom
Buy at single, double or triple bottom. This is an important rule especially for double bottom when you see that the second bottom is higher than the first bottom, it would be a compelling buy signal.
Similarly, sell at single, double or triple top as these are obvious price patterns that most traders will see and they will act on it at the same time. Always remember to determine your stop loss point and follow your plan strictly.
In addition, do not overlook the fact that the 4th time the stock reaches the same level (either top or bottom), it is not safe to sell or buy because it nearly always go through.
Rule No.3: Buy and Sell on Percentages
Buy or sell at 50% decline from any high level; or 50% advance from any low level. This is because 50% is an important support and resistance level.
Above is the chart for Genting Singapore. It fell from S$2.36 in November 2010 to $1.18 in November 2012, exactly 50% decline. Although, sometimes it may decline beyond 50% but as a rule of thumb, start buying when you see 50% decline from the peak won't go too wrong.
Today I'll just talk about 3 rules, next week I'll share with you with a few more rules from this book.
Happy Trading,
Pauline Yong
Rule No.1: Determine The Trend
Always identify the primary trend first. This can be easily identify using trendlines and moving averages. As a rule of thumb, 10,20 MA are for short term trends, 50, 100 MA medium term and 200 MA for long term trend. When the price is above the 200 MA or the long term trendline, it shows that the stock is in a long term bull trend such as the diagram below.
Rule No.2: Buy at Single, Double or Triple Bottom
Buy at single, double or triple bottom. This is an important rule especially for double bottom when you see that the second bottom is higher than the first bottom, it would be a compelling buy signal.
Similarly, sell at single, double or triple top as these are obvious price patterns that most traders will see and they will act on it at the same time. Always remember to determine your stop loss point and follow your plan strictly.
In addition, do not overlook the fact that the 4th time the stock reaches the same level (either top or bottom), it is not safe to sell or buy because it nearly always go through.
Rule No.3: Buy and Sell on Percentages
Buy or sell at 50% decline from any high level; or 50% advance from any low level. This is because 50% is an important support and resistance level.
Today I'll just talk about 3 rules, next week I'll share with you with a few more rules from this book.
Happy Trading,
Pauline Yong
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Discussions
11 people like this. Showing 24 of 24 comments
thx for the effort and your kindly sharing, pauline.
erm u still holding uchitec ?
2013-01-05 17:05
Hi Pauline... mind to share your investment or working or portfolio experiences...i think we all want to know
2013-01-06 12:49
We should look beyond Malaysia, invest in Korea, India and China ETFs and unit trusts. However if u want me to name some local stocks, invest in KLCI component stocks won't go too wrong! Axiata, RHBCap, UEMLand, Gamuda...
2013-01-06 12:55
Previously invest in unit trust but boring although make profit...
Mind share your preference price entry for those stock...
I buy and read your book but unable to find UNDERVALUED STOCK IN KLCI...
Can you share with me UNDERVALUED STOCK in KLCI?
Do you have fb Pauline...
2013-01-06 13:05
Why dont IN MY...
Previously invested in AMB VALUE TRUST last year atentry price 0.4711 and sell b4 dividen...
Mind share undervalued stock Pauline?
Tq...
2013-01-06 13:27
There are many undervalued stocks but with no big players support, those stocks hardly move. So in the end, i find stocks that have big players' support are the best in Malaysia which is 60%-80% controlled by local and foreign institutional players.
2013-01-06 14:34
Pauline is right! Stick to big cap stks better esp. those with gd div yields n gd management!
2013-01-06 15:36
But some SUPER LAGGARD STOCK give attractive dividen n sometime ok on capital gain...
Mind sharing your undervalued stock toplist Pauline?
2013-01-06 16:28
Awesome post. Read your book. Fell in love with it.. Good book ... pass it to my eldest son as he just started his Uni. Hope your book will help him as it did to me. This is what retailers wants someone like Ms Yong writing & sharing her method style & someone who had years of experience in market that retailers can look up to...
Unlike Mr Teh who had very small life span in market but dare to suck peoples /retailers hard earned money with How NOT to lose money motto... & many fell victim.
Tq again Ms Yong. Really hope you can find time to write more here advise or mentor some of us retailers who need some guidance in market. As we all know how vicious market can be if one is ignorant. TQ... Cheers
2013-01-06 19:32
To v m Pauline! Very helpful tips indeed. Hope to improve my trade and collect some angpow CNY!
2013-01-06 21:03
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
pathew
Nice guide! Much appreciated sharing:)
2013-01-05 17:01