How to Select and Hold Stocks: Key Trading Insights

The higher a stock’s price, the faster and more volatile its movements become. When a stock exceeds $50, its price changes accelerate; above $100, fluctuations intensify further; and beyond $150 or $200, volatility and frequency spike dramatically.

This principle also applies to declining stocks. During the initial drop (50–100 points), the descent is typically rapid. Below $100, price swings narrow; under $50, volatility and rebound potential diminish further—especially in deeply depressed stocks, where lower prices correlate with weaker recoveries.

Trading Strategies:

1. Cut Losses Quickly

   • If the closing price on the first day after purchase is below your entry, the trend may be misjudged.

   • If losses persist for three consecutive trading days, exit immediately.

2. Let Profits Run

   • If profitable on the first day and still gaining after three days, the trend is likely correctly identified—hold to capture the major move.

3. Avoid "Buy-and-Hope" Traps

   • Never "buy outright" (without stop-losses), as this offers no protection in adverse trends.

   • The only relatively safe entry point is near $10 or lower, but even then, beware of total loss risks.

4. Strict Risk Management

   • Always use stop-loss orders to cap losses.

   • Admit mistakes early; conversely, ride winning positions when the trend favors you.

5. Adapt to Market Shifts

   • Do not hold stocks solely due to past performance or familiarity.

   • Market leaders rotate—stay updated and pivot to new high-potential stocks.