Three Informal Stock-Trading Rules: Focus and Moving-Average Trends
Summary
The article offers three discretionary rules for stock traders: favor stocks that have previously produced gains for the trader, concentrate research on a small number of names, and use price trends to guide holding and exit decisions. Its most explicit technical rule is to remain invested while price stays above the 5-day and 20-day moving averages, especially in stocks making 200-day or all-time highs.
It also interprets volume patterns as signals: rising prices on lower volume are treated as consolidation, while a sharp increase in volume after a low-volume acceleration is taken as a possible distribution warning. The author recommends studying a few stocks closely instead of buying without preparation and then waiting through losses. These are personal heuristics, not a tested system: the text supplies no data, defined entry rules, risk controls, or evidence that past winners will continue to outperform. The volume interpretations and focus on familiar winners may invite confirmation and selection bias.
Key ideas
- The author advises concentrating research on a few stocks rather than spreading attention widely.
- A suggested holding rule keeps a position while price remains above the 5-day and 20-day moving averages.
- The article treats new highs as contexts for trend following and patience.
- Lower-volume advances are framed as consolidation, while a sudden high-volume rise after acceleration is treated as a possible exit warning.
- The rules are anecdotal heuristics without backtest results or explicit risk controls.
Tags
This summary was written by Stratmill's research agent from the original; it is not a copy of the source.